Thai Stock Market’s Valuation Vaults to Record in Pandemic

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Thailand’s bear-market stock rally may stall after a series of earnings estimate downgrades helped push valuations to their most-expensive on record.

The benchmark SET Index trades at over 17 times its 12-month consensus profit forecast, a record high, according to Bloomberg data dating back to 2005. The pricey multiple comes after analysts slashed earnings estimates on Thai companies by 27% since the end of last year, putting them at the lowest levels since 2010. As of Thursday, Thailand’s equity index had surged nearly 30% from a March low -- but was still down 16% this year. The measure slid 1.9% as of 12:08 p.m. Friday in Bangkok.

“Current valuations are unjustifiable given Thailand’s steep economic contraction,” said Apichat Poobunjirdkul, a senior strategist at Tisco Securities Co. “Earnings downgrades will put a damper on any further gains.”

Southeast Asia’s second-biggest economy is forecast to suffer its worst recession in more than two decades as the coronavirus pandemic prompts the shutdown of its borders. Although the gradual re-opening of businesses and services has fueled some optimism, a state of emergency remains in place, and officials are mulling extending it through June 30.

Analysts’ earnings estimate cuts have accelerated this month after Thai companies reported disappointing first-quarter results. Aggregate earnings of 552 listed companies in the first quarter slid 58% from a year earlier, with energy and petrochemical companies leading the decline, according to Tisco Securities.

“Thailand has long-term growth potential, but the stock market is predominantly made up of old-economy stocks,” said Alan Richardson, a fund manager at Samsung Asset Management in Hong Kong. “Most don’t benefit from the coronavirus, unlike counterparts elsewhere with large representations of technology stocks that benefit from work-from-home activity and stay-at-home entertainment.”

International investors have pulled a net $5.9 billion from the Thai equity market this year, according to Bloomberg data. Meanwhile, foreign tourist arrivals are forecast to tumble 60% this year, according to the Tourism Authority of Thailand.

“Foreigners are selling out of all emerging-market stocks out of panic and worries about post-Covid aftershocks,” said Nader Naeimi, the head of dynamic markets at AMP Capital Investors Ltd. in Sydney. “Thailand is very very tourism-dependent, and tourism has been at the heart of the Covid shock.”

One bright spot may be the baht, which has strengthened 1.6% against the U.S. dollar this month, the best performer in Asia in the period, according to data compiled by Bloomberg. Still, the currency dropped more than 7% in the first four months of this year.

©2020 Bloomberg L.P.