Review of 2020
2020 was a challenging year not only for Thailand but for the world economy. In addition to the trade tensions between US and China, we witnessed the world economy and stock markets ravaged by the COVID-19 pandemic.
Thailand’s 2020 GDP contracted 6.6% comparing to 2.4% growth in 2019, mainly due to the COVID-19 pandemic which caused a sharp decline in international tourist arrivals. Given that tourism is a key driver of Thailand’s economic growth, the impact of the sudden disappearance of tourism receipts spilled over to many sectors. It adversely impacted the hospitality, food and beverage, aviation and retail sectors and also cast a cloud over the property and banking sectors.
Although economic growth tilted southwards, 2020 GDP contraction was less than what was initially feared when many sectors of the world economy went into full lockdown in the first half of 2020. This was mainly helped by decisive fiscal measures implemented by governments worldwide to alleviate the economic impact of the COVID-19 pandemic. The major central banks eased monetary policy to cushion the impact of the COVID-19 fallout.
Outlook for 2021
UOB Global Economics & Markets Research (GEMR) forecasts that Thailand’s GDP growth will increase by 6.0% yoy as the economy recovers from the COVID-19 pandemic. To support the recovery, the government has launched sizeable stimulus packages for businesses and for the tourism industry, which contributes a significant proportion to Thailand’s economy. It stands ready to implement additional measures if necessary.
Meanwhile, we see that the GDP growth still has downside risk as the recovery would remain highly uncertain and vulnerable amid the slow economic recovery. The new waves of domestic COVID-19 infections may drag down private consumption and severe measures to contain the infections will delay the reopening of the country to foreign tourists.
Whilst the recovery might be delayed due to the factors mentioned above, we are hopeful that the impressive progress made by the government in purchasing the vaccine and the planned roll-out of the vaccination program will boost the confidence of the economy and the opening up of the country to foreign tourists.
We anticipate that the Bank of Thailand (BOT) would continue to maintain accommodating monetary policy throughout 2021. To cope with the strengthening of the baht, the BOT has decided to relax capital outflow, rather than cut interest rates. Moreover, the BOT also has plans to increase the scrutiny of fund inflows into the local bond market. This may benefit Thailand’s stock market as foreign investors may use equity rather than bond as a proxy to benefit from the fluctuation in the Thai Baht.
Stock Market Review for 2020
The SET Index experienced a roller coaster movement. It started with plunging 28.74% in the first quarter due to the impact from the COVID-19 pandemic, then rallying 28.73% for the next 9 months and ended the year with an 8.26% decline.
In terms of performance, the sector outperformers were electronics (379.1%), agriculture (61.5%), packaging (44.0%), paper & printing (19.0%) and steel (19.0%), which are mostly small-cap stocks that benefit from global demand. The worst performers were sectors which fundamentally deteriorated from the pandemic. They include REITs (-26.5%), banking (-24.0%), tourism (-19.0%), media (-18.5%) and transportation (-18.4%).
Foreign investors heavily sold Thailand stocks before becoming net buyers for the last three months of 2020. They were net sellers of equities worth US$8.29b, which rose more than five times from US$1.49b in 2019.
2020 Operating Performance
The volatility in the stock market caused by the pandemic have had a positive impact on our business. Turnover increased from 609,985 M. Baht in 2019 to 875,024 M. Baht in 2020. Net profit increased during the corresponding periods from 15,925,914 Baht to 239,646,211 Baht. In line with the Company’s policy of paying a dividend equivalent to 20% of net profit after tax, a dividend of Baht 0.10 in respect of the financial year ended 31 December 2020 will be proposed for approval at the shareholder’s meeting.
Stock Market and Business Outlook for 2021
We are optimistic about the stock market for 2021, due to: a) rollout of the vaccine and the resultant gradual normalization of business and travel activities, b) earnings recovery and positive business outlook, c) accommodating financial policies by governments supporting business recovery.
We expect to see growing trading momentum in 2021.
Our investment themes for 2021 are focused on: a) beneficiaries of the global economic growth recovery, such as energy and petrochemical stocks; b) recovery of international trade demand, which is positive for exporters such as the food industry; c) manufacturers moving out of China that benefits the industrial estate sector; and d) reopening the country, which will allow foreign visitors to enter Thailand.
Appreciation
Finally, I would like to, on behalf of the Board, thank our shareholders and clients for their continued trust and support in the Company and to our management team and colleagues for their dedication and contributions.
We look forward to your continuing support.
Chairman of the Board of Directors
UOB Kay Hian Securities (Thailand) Public Company Limited
