Bangkok Rate Cut: Stocks Soar, Banks Suffer
Thailand’s unexpected interest rate cut has injected much-needed optimism into the country’s struggling stock market, sparking a rally and bolstering investor confidence. However, while sectors like real estate, leasing, and high-debt companies are celebrating, the move has cast a shadow over the banking sector, raising concerns about shrinking profit margins.
The Bank of Thailand’s surprise decision on Wednesday to slash the policy rate by 25 basis points sent ripples through the market, resulting in the SET index rebounding by 24.75 points, or nearly 2%, to close at 1,231.14. This surge, accompanied by a trading volume of 62 billion baht—the highest single-day figure this year—offers a glimmer of hope for the Thai bourse, which has been the worst-performing globally, plummeting 12.1% year-to-date.
Analysts attribute the market’s enthusiastic response to the anticipated benefits for several key sectors. Rakpong Chaisuparakul, Senior Vice President at KGI Securities (Thailand), explains that the lower borrowing costs resulting from the rate cut are a boon for non-bank finance companies, stabilizing their non-performing loan prospects. Furthermore, he notes that the anticipated reduction in commercial bank lending rates, coupled with attractive interim dividend yields, positions property stocks for significant gains.
Asia Plus Securities (ASPS) echoes this sentiment, highlighting finance stocks as prime beneficiaries, specifically recommending Srisawad Corporation (SAWAD), Tisco Financial Group (TISCO), Muangthai Capital (MTC), and Ngern Tid Lor (TIDLOR). The brokerage also anticipates a positive impact on dividend-paying stocks such as Intouch Holdings (INTUCH), Central Pattana (CPN), and several prominent real estate developers: Land and Houses (LH), Supalai (SPALI), Sansiri (SIRI), SC Asset Corporation (SC), and AP Thailand (AP). Furthermore, ASPS predicts the resulting weaker baht will bolster tourism and export-oriented companies, including Airports of Thailand (AOT), i-Tail Corporation (ITC), Erawan Group (ERW), Thai Union Group (TU), Central Plaza Hotel (CENTEL), and Charoen Pokphand Foods (CPF).
However, the rate cut presents a double-edged sword, impacting the banking sector negatively. Analysts at Daol Securities (Thailand) warn that the reduced interest rates will likely lead to an immediate decrease in interest income, particularly for major banks like Bangkok Bank (BBL), Krungthai Bank (KTB), Kasikornbank (KBANK), and Siam Commercial Bank (SCB). They estimate that a further 25 basis point reduction could shave off approximately 3% of the banking sector’s net profit estimates. Despite this, Daol maintains an overweight position on the sector, citing its overall robust performance and recommending KTB and BBL as top picks. Smaller banks like Kiatnakin Phatra Bank (KKP) and Tisco Bank are expected to weather the storm more effectively.
Looking ahead, Daol Securities anticipates the Bank of Thailand might further adjust its GDP growth forecast at the next Monetary Policy Committee meeting scheduled for April 30th. They predict a downward revision to slightly above 2.5% from the current 2.9%, citing headwinds such as a declining manufacturing sector, increased competition from imports, and ongoing uncertainties surrounding US trade policies under then-President Donald Trump.
Krungsri Securities also views the rate cut as a positive catalyst for the SET index, estimating a potential boost of around 40 points. They believe it will particularly benefit high-yield stocks like Advanced Info Service (ADVANC) and heavily indebted companies such as Minor International (MINT) and CP All (CPALL).
While the rate cut provides a welcome stimulus to the Thai stock market, its long-term impact remains to be seen. The balancing act between stimulating growth and protecting the profitability of key sectors like banking will undoubtedly be a central focus for investors and policymakers alike.
