SCB CIO assesses after risk factors affecting financial institution stability Major central banks are expected to start signaling a halt to rate hikes within the second quarter and believe that there is a risk to financial institutions. Until it spread to become a crisis in the whole system, there are still quite a few Because most of them are individual problems and the Fed managed to build confidence among depositors and help commercial banks liquidity quite quickly. We recommend accumulating high-quality corporate bonds, believing that the continued interest rate hike and the cautiousness in lending by commercial banks will cause medium- and long-term bond yields to decline in the second half of 2023, including Chinese A shares. -shares and Thai stocks that have interesting valuations and are likely to recover in the future.
Mr. Kampol Adireksombat, Senior Vice President and team leader, SCB Chief Investment Office (SCB CIO), Siam Commercial Bank Public Company Limited revealed that the SCB CIO views the risk of financial institution stability as a result of bank run concerns in the United States and Switzerland. Switzerland This will result in the major central banks likely to stop raising interest rates in the second quarter, in the case of the Fed, leading to the issue of cracks in the financial system. (Even though this crack has been filled to some extent) as a decision-making factor. Because in conducting monetary policy of the Fed, in addition to inflation and employment issues, the Fed must also consider financial stability. financial institution The payment system and consumer protection as well make the Fed likely to raise interest rates by only 25 bps at the May meeting with the maximum policy rate (terminal rate) at 5.00%-5.25% and keep interest rates unchanged. this level until the end of 2023
As for investment strategies, SCB CIO estimates that this is still a good opportunity to accumulate high-quality bonds. We believe that headline inflation has slowed down. (Due to lower energy prices) and weaker economic numbers. (As a result of continued interest rate increases and commercial bank lending cautiousness) will cause medium- and long-term bond yields to decline in the second half of 2023.
In addition, Asian real estate investment trusts (Asian REITs) are also attractive due to the opening up of cities in China and ASEAN. This will positively affect the future occupancy rates and rental rates of REITs, both in the hotel sector. and commercial areas (industrial and warehouse), especially in Thailand and Singapore where economic activities are highly dependent on the Chinese economy. While changes in bond yields, especially in the case of Thailand, are beginning to be limited. As a result, the value of REITs in Thailand and Singapore is likely to be largely determined by recovering occupancy and rental rates.
investment in stocks Although the value considering the price to earnings per share (P/E ratio) has become more attractive, there is still pressure from both high financial costs. and negative profit growth prospects Therefore, be careful with groups with high debt burden. Regarding the results for the fourth quarter of 2022, most of which were released from the stock market, reflected 1) the contraction in the profit growth rate of listed companies, causing risks. profit year on year two consecutive quarters of contraction (earning recession) and 2) a decline in the number of companies earning better-than-expected profits (earnings’ positive surprises).
In this regard, SCB CIO has adjusted its view on Vietnamese stocks to Slightly Negative (gradually selling), with Vietnam still a potential market for long-term investment. As for the situation of delinquent repayment of debentures We believe that this will not escalate into an economic crisis. Most of which are in the real estate sector. This may result in negative sentiment towards businesses in the real estate sector and other related sectors such as banking and construction sectors. affect the economy and performance of listed companies in the Vietnamese stock market
Meanwhile, Vietnam’s external stability, especially the issue of international reserves, will continue to be a pressing issue in the next 3-6 months. We also recommend investing in the Chinese stock market (A-share: Positive; H-share Slightly Positive) and the Thai stock market (Slightly Positive) with attractive valuations and potential earnings recovery in the future.
