Investment in Thai Stocks during the New Normal

The COVID-19 pandemic has affected Thailand’s economy in Q1/2020, and its growth dropped 1.8% comparing to its 1.5% expansion in the previous quarter. The spending of private and government sectors including investment of both parties slowed down, as well as exports in general. Even though the government’s spending and investment seem to expand but Thai’s economy in Q2/2020 was still gradually declining 12.2% from Q1.



That recession brought “3 Lows, 3 Highs” to Thai’s economy and become a core factor that has continually driven economic recovery.

1.Low GDP Growth

2. Low-Interest Rate

3.Low Inflation

4. High Employment

5.High Household Debt

6.High Public Debt
 

The COVID-19 crisis led the structure and business direction to the New Normal by stimulating the change of the new business structure. This crisis also declined competitiveness among the old businesses as the competitive environment has been changed. Moreover, society and the business sectors have been forced to convert to the digital era and touchless platform, so everything is accelerated to the digital world. Thus, working lifestyle and interaction have been altered accordingly.
 

Likewise, the consequences after COVID-19 highly declined Thai stock index in Q1/2020 from Q4/2019, especially in March 2020 so the Circuit Breaker was enforced 3 times. At the end of Q1/2020, the Thai stock index closed at 1,126 points or a 28.7% decrease from the previous quarter.


However, the Thai stock market is still strong and can survive in this crisis while the Thai Listed company has rapidly changed, improved, and adjusted themselves to the New Normal, so investors are confident in investment. In Q2/2020, the Thai stock index closed at 1,339 points or an 18.92% increase from the previous quarter.

The key factor is because Thailand gradually allowed many businesses to resume their operations and permitted international travel with entry restrictions. This has driven market index and industries to recover constantly. The strongest recovery existed in consuming products, agricultural and food industry including other businesses like digital technology, logistics, and health services which reveal the high potential in the New Normal.


We have seen that most companies tried to find new business strategies to build a new income base for long-term growth. A change of Thai companies in the New Normal is self-adjustment, which means being agile in responding quickly to environmental change for sustainable growth. 


The Stock Exchange of Thailand made a survey to the Executives of registered companies during the COVID-19 crisis and found that Thai companies are able to adjust themselves in 4 areas.

 

1.Product Design and New Services: At present, products and services are newly designed to suit this era. For instance, e-commerce business which requires data analysis, and improvement of hygiene standards to ensure that products and services are delivered to customers without any health concern. A clear example is hospital business which uses technology to provide a real-time online doctor consultation like disease analysis, delivering blood test result from patient’s home to hospital, and medicine home delivery to avoid commuting to hospital.


2.Adjustment: An adjustment
 process is created to ensure consistency, connection, and access to all available services such as Ongoing customer service via Call Center and Digital channels on several platforms. Customers can pay service fee through a variety of channels, make direct contact with the company swiftly, or create service system through platforms to provide more effective service for customers.


3. Cash Flow and Supply Chain:
In order to manage SMEs and Startup efficiently. We should have concerns on minimizing cost and save cash in short term, forecast cash flow and liquidity thoroughly by setting different scenario and consider higher cost structure to retain liquidity to keep the operation going. For Supply Chain, consider changing the process structure and network of supply chain to create flexibility, and avoid relying on raw material source or specific suppliers.


4. People Management:
This is a vital strategy to keep the company moving forward as an employee is the most valuable asset. The company should have supporting measures to create happy and safe working environment.

Port Arrangement of Thai Stocks in the New Normal 

A question from investors during crisis is how to invest in Thai stocks. To maintain momentum, they should manage port investment resisting to critical conditions. Siam Commercial Bank suggests that investors choose various stocks to balance port investment and fit the situation.


1.Core Portfolio: Focusing on Defensive Stock which is high quality with long-term and solid fundamentals, stays in an industry that has growth potential in structure and is likely to recover rapidly after the COVID-19 crisis, can foresee long-term growth, and has the capability to make a profit. Even though supply is now facing a downturn from the crisis, the so-called stocks include hospitals, retailing, and communications. 


Beware of service businesses because their recovery is quite slow, high-debt default of SMEs and medium businesses, and risk in geopolitics in the current environment.


2.Tactical Portfolio: 
Focusing on stocks that adjust to the World Economic Cycle and Economic Cycle in countries that show better quality and the value is lower. We can do that by analyzing the Bottom-up to find stocks with unique drivers and risk protection from uncertainty based on historical data like stocks of Electronics, Petrochemicals, and Bank.


The Bottom-up analysis is an approach to screen stocks with solid fundamentals or fundamental value such as Return on Equity (ROE), Net Profit Margin, or Dividend Yield at a good level. This means that the industry, in general, has a tendency to grow among crises. However, during Covid-19 times, stocks plunged according to the overall market situation.


Mixing 2 types of port investments would depend on how well the investors can take risks. If they take a small risk, they can focus on the most reliable stocks. While facing the COVID-19 crisis, investors may be hesitant about which type of stocks they should own, and how many shares they should have in each type of stock. At first, they should start searching for information and evaluating which stock is likely to provide a satisfactory level of profit.