Bangkok: BLS indicates that the Middle East conflict is pressuring the SET Index to undergo a correction to 1,400-1,450 points. Bualuang Securities fears a new round of conflict could plunge the Thai stock index by 5-10% within a month, targeting a correction to 1,400-1,450 points, following the impending surge in oil prices. However, they believe this presents an opportunity to accumulate stocks, noting that historical data shows foreign fund flows are poised to return to Thailand averaging 160 billion baht, pushing the year-end 2026 index target to 1,570-1,670 points.

According to Thai News Agency, Mr. Piriyapol Kongvanich, strategist at BLS Wealth Research, Bualuang Securities, revealed the direction of the Thai stock market amidst volatility from geopolitical factors, especially the potential conflict between the United States and Iran. Based on a study of market behavior during four major past wars, crude oil prices tend to rise by an average of 9% within two weeks and reach 13% within a month. This will be a factor pressuring the SET index to correct by an average of 4-5% in the first week. Sectors that are expected to remain positive are the energy sector (excluding power plants), the telecommunications sector, and the hospital sector.

For this round, if the situation escalates and is prolonged, it is estimated that the index has a chance of entering a correction phase for about 2-4 weeks, with a downside of around 5-10%, or testing the 1,400-1,450 point level. However, if the situation begins to ease and negotiations take place, it is believed that the Thai stock market can rebound into an upward trend again, driven by a recovery in earnings per share (EPS) and the potential return of foreign investment (fund flow).

Furthermore, statistics on the last three fund inflows, between February-September 2016, March-July 2019, and July 2021-January 2023, show continuous inflows averaging 10 months, with net purchases reaching 160 billion baht. If global manufacturing and corporate earnings recover strongly, fund inflows could last up to 12 months, with net purchases reaching 200 billion baht. This would push the earning yield gap between stocks and bonds down to 2.7-3.0% before the cycle ends.

We estimate the SET Index target for the end of 2026 in a base case scenario, assuming the Thai economy still faces challenges from household debt and tight fiscal conditions. We project GDP growth of 1.8%, resulting in a target index of 1,570 points. In the best-case scenario, if the economy recovers significantly, the index could reach 1,670 points.

For investment strategy, we recommend accumulating shares during market corrections, focusing on stocks targeted by foreign fund flows that are still undervalued and have a history of inflows in previous periods. These include BH, CPALL, CPN, and MINT.