Bangkok, KKP indicates that the global economy will continue to grow, keeping an eye on US politics, recommending full investment while limiting risks, estimating that the AI ??theme can continue for a while, investing abroad while accepting currency risks.
Dr. Pipat Leungnarumitchai, Chief Economist of Kiatnakin Phatra Financial Group (KKP), revealed that the global economy still has a tendency to grow, although not as hot as last year. And the growth is still expanding more widely, led by the United States, which is still strong with inflation that is likely to gradually decrease. This will help build confidence in the FED about inflation. KKP still expects the FED to cut interest rates 1-2 times in the second half of 2024. While Europe has survived the recession and is seeing better signs, although not as bright as the United States, and inflation is likely to decrease as well. In addition, emerging markets excluding China (Emerging Markets ex China) also have a tendency to grow well. Although there is a
risk that inflation may decrease more slowly than expected, it should decrease.
While the risk of an economic recession has decreased, the issue that needs to be closely monitored in the second half of the year is the US presidential election, which may lead to uncertainty in terms of both the policies of major economies and geopolitical risks in terms of international trade policies, which China will be directly affected by. The Chinese economy is still affected by internal problems that have not been resolved, such as the sluggish real estate sector and the lack of recovery in consumer confidence. And the lack of stimulus measures, coupled with the risk of a trade war after the US presidential election, the outlook for the Chinese stock market is still not attractive. It is
recommended to invest at full rate while limiting risks (Grow-Protect)
. Mr. Thaweesak Paopallop, Head of Economic and Investment Analysis, Kiatnakin Phatra Securities, gave his view that the growth of the US and global economies can
continue. However, with the increasing and unpredictable challenges of global geopolitics, Kiatnakin Phatra Securities recommends that investors allocate their investments carefully, focusing on high-quality stocks, and diversifying their portfolios by investing both in active (Grow) and risk-limiting (Protect) modes.
For active (Grow) investments, interesting stocks are stocks in groups that change according to the economic cycle (Cyclical growth) in emerging markets excluding China (Emerging Markets ex China) because the economic cycle is favorable and the profit momentum is strong, and the financial business group (Financials) because the fee income and asset quality tend to improve. The groups suitable for long-term investment are Indian stocks and technology companies related to the AI ??supply chain (AI Value Chain) in addition to semiconductors because AI investment still has a tendency to grow.
For investment to protect risks, it is recommended to invest in high-quality global debt instruments becau
se they provide the highest yield in over a decade, but limit the risk from yield fluctuations by focusing on investments with a lifespan of 3-5 years. In addition, since the risk is not yet reflected in all stock prices in the market, it is recommended to invest in derivatives that protect the principal but still leave room for upside, such as Principal Protected Note on SandP 500 Index or Principal Protected Note on Dollar Index.
For mixed investment (Grow/Protect), we recommend allocating a Prudent Asset Allocation portfolio and investing in the US stock market, which should be the most resilient in the event of a trade war. In addition, businesses with defensive characteristics, such as utilities and infrastructure businesses, are interesting because they are resistant to negative impacts but can still benefit from AI developments, such as increased energy demand from data centers.
Investment in AI stocks still has a tendency to grow further because investment in development is still in its early stages
and still has potential to be used. We will see the expansion of use to the midstream and downstream of the AI ??supply chain (AI Value Chain). In terms of stock valuation, it is not considered cheap but not expensive to the point of bubbles.
For foreign investment, the volatility of Forex (Foreign Exchange) is high in the short term but in the long term it is not a major factor affecting returns. In addition, the cost of hedging foreign exchange risk is quite high. Therefore, foreign investment that is open to exchange rate risk (unhedged) should yield high returns abroad in full. Kiatnakin Phatra Securities expects that the USD/THB hedging cost will tend to be expensive for at least another 2-3 years due to the deteriorating structural economic problems of Thailand and the relatively strong US economy, which will cause the interest rate spread compared to the US to be in the range of 2-3%.
Therefore, it recommends investing in funds that are consistent with the Grow and Protect strategy, such as KKP’s Man
date Service or the KKP-SGAA* fund, the TUSFIN-A fund, and the KKP EMXCN-UH* fund.
Source: Thai News Agency