Bangkok: Thai stocks rose for the fourth consecutive day this morning, climbing over 12 points, with sustained capital inflows anticipated. Analysts remain divided on whether the Monetary Policy Committee (MPC) will decide to cut interest rates at its upcoming meeting on August 13, following four consecutive months of negative inflation.
According to Thai News Agency, the Thai stock index gained 12 points, reaching 1,277 points at 10:44 a.m. The Set Index was primarily driven by inflows of funds. Mr. Korapat Worachet, Assistant Managing Director of Krungsri Securities, indicated that the weakening dollar index is encouraging investors to enter emerging markets in Asia, including Thailand, leading to a reversal of investment positions. Additionally, capital is flowing into Thailand due to the restructuring of the ASEAN Sustainable Investment Fund center, driven by Thai ESG initiatives. Investment is also directed towards the renewable energy sector, with funds flowing out of the Energy Transition and Future Mobility sectors.
Thai inflation remains lower than expected, resulting in bond yields dropping to a 30-month low. The 1-year TH Bond Yield fell to 1.384%, the lowest since January 2023. The market is beginning to factor in a potential interest rate cut by the MPC in the fourth quarter, with Krungsri Research forecasting a reduction in the policy interest rate by 0.25% to 1.50%.
International dynamics, particularly the actions of US President Donald Trump, require close monitoring. Trump’s new tariffs, including a 100% chip tax for companies not investing in the US and potentially increased import taxes from India, could impact global markets. Although India’s immediate impact is limited, these developments are likely to shift supply chain dynamics, presenting opportunities for Thailand to become a significant strategic node for capital flow. Industrial estates in Thailand could see potential benefits from this shift.
Mr. Kobsit Silpachai, Head of Economic and Capital Market Research at Kasikornbank (KBANK), estimates that Thailand’s inflation rate in 2025 will likely remain below the Bank of Thailand’s target for the second year in a row, due to the slowing economy and a significant drop in global energy prices. The Kasikorn Research Center projects Thai inflation this year at 0.3%, lower than the BoT’s forecast of 1.0% and the NESDB’s forecast of 0.5%. The MPC is expected to maintain the interest rate at 1.75%.
Kasikorn Securities predicts that the MPC will keep the policy interest rate at 1.75% in its August meeting, consistent with the last meeting in June 2015. The firm assesses that Thailand faces reduced risks, especially in light of US reciprocal tariffs being set at 19% following an agreement with the US. The baht is expected to remain at 33.70 baht/US dollar by year-end 2015, though short-term volatility persists due to expectations that the US Federal Reserve might cut its policy interest rate.
The Ministry of Commerce reported a headline inflation rate (CPI) decrease of -0.7% year-on-year for July 2015, surpassing market expectations of -0.4% and marking the fourth month of contraction, mainly due to falling energy prices and government relief measures affecting electricity costs. Prices for fresh produce and personal care items have also declined.