Thai firms wary of Trump impact

The business sector is increasingly concerned about Donald Trump’s victory in the US election, with analysts expecting the global economy to be affected by increased US protectionism, while interest rates might decline slower than expected.
Kavee Chukitkasem, head of research and content at Pi Securities, advised investors to partially offload high-risk assets in their portfolio as Trump’s extreme policies could lead to a strong reaction from some countries, especially China.
“Investors have to be careful as Trump sent a clear signal he will kick off a trade war with China, making Beijing highly likely to impose countermeasures, with other countries affected by US trade policies probably doing the same,” he said.
Trump’s proposed tariff hikes would also increase product prices in the US, meaning inflation would not decline and interest rates may be cut less swiftly than the market expects, said Mr Kavee.
“Investing in high-risk assets now requires particular caution because the global economy will probably slow, affecting the profits of listed companies, including those in the US,” he said.
“I recommend investors partially divest high-risk assets, but not all of them.”
The Stock Exchange of Thailand (SET) index will probably post capital outflows to the US as Trump promised a corporate income tax cut, resulting in US stock markets jumping overnight after the victory was called, noted the brokerage.
Pi expects the SET index to move in a range of 1,430-1,480 points until year-end. Banking stocks, including large banks, are recommended as interest rates might not reduce as much as previously anticipated. The brokerage’s top picks are Kasikornbank, Bangkok Bank and Krungthai Bank.
Export stocks should realise short-term benefits from baht depreciation, with Thai Union Group (TU) among the major beneficiaries, said Mr Kavee.
Prakit Siriwattanaket, managing director of Merchant Partners Asset Management, also recommended banking stocks, especially those paying good dividends.
“I’m concerned the US economy will be affected by Trump’s policies. If that happens, Thailand cannot avoid the impact because 18% of Thai exports are sent to the US,” he said.
In the worst-case scenario, Mr Prakit said the SET index might decrease by 5-6% or 80 points after the US election.
“In the first six months of Trump 2.0, I anticipate the Thai economy could decline by 0.2-0.3 percentage points, while the SET index is expected to dip by 2-3% or 30-40 points,” he said.
Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand), said the tariffs proposed by Trump “are very complicated, and investors should monitor whether he will be as aggressive in office as he was on the campaign trail”.
“Given concerns about US inflation and the risk of a ballooning budget deficit, US treasury yields and the dollar could strengthen in the near term,” he said.
KGI has a positive view on industrial estate stocks, as protectionism could result in foreign direct investment relocation to Southeast Asia, while banks would benefit from rising bond yields and lower interest rate cuts.
On the negative side, investors should monitor effects from the trade war on electronics and the food and beverage sector, said the brokerage.
“Investors should also watch Trump’s stance on the military clashes between Russia and Ukraine as well as Israel and Iran, and the tension between China and Taiwan,” said Mr Rakpong.
The research division of the Export-Import Bank of Thailand (Exim Bank) said the US-China trade war ratcheting up is unlikely to lead to higher Thai exports replacing Chinese products, as few of these products are manufactured in Thailand and the country has relatively low export competitiveness.
Most of the US tariffs on Chinese goods are for consumer goods such as smartphones, tablets, clothing, shoes and furniture. Thailand is not a major production base for these items and has lower export competitiveness than Vietnam or Mexico, noted the bank.
Trump’s policies may increase the influx of Chinese products into Thailand as the country looks to other nations to ship surplus consumer goods, according to Exim Bank.
The bank said the trend of shifting investments to conflict-free countries is expected to continue, but with increasing pressure. Under a Trump administration, the US is expected to erect trade barriers with various countries, causing China to relocate production bases, making more nations targeted by US trade measures.
Global carbon reduction mechanisms may face setbacks, which could indirectly affect Thailand’s push for a low-carbon economy because the US may delay the Clean Competition Act, noted the bank.
This may seem to be a short-term positive for the business sector because companies wouldn’t need to rush investments to transition, said Exim Bank. However, such a move would have a negative effect on Thailand’s long-term push for a low-carbon economy.
The Mideast conflict could easily escalate in severity as Israel may be more willing to take aggressive military measures with the full backing of the US, which could lead to sharp increases in energy prices and transport costs.
Given such scenarios, Exim Bank advises Thai exporters to reduce risks, using foreign exchange forward contracts to protect against currency fluctuations.
“Although the weakening baht may offer some exporters benefits, speculation on currency movements is too risky in the highly volatile global environment,” said the bank.
Businesses should consider export credit insurance and investment insurance to mitigate uncertainties in trading partner countries, which may increase if geopolitical tensions rise under a Trump administration.
Prasert Jantararuangthong, the digital economy and society minister, said a Trump administration may help end the war between Russia and Ukraine, but a global trade war is likely to expand.
Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said strict Trump economic measures against China would indirectly impact tourism in Thailand, which is still reliant on the mainland market.
He said the recovery of Chinese visitors, which was slower than expected this year, would remain stagnant next year as Beijing must protect domestic consumption by continuing to encourage residents to travel within China instead of abroad.
“If Trump can follow up his campaign rhetoric of implementing economic policies that reduce the US trade deficit with other countries, the global economy might decline during his term,” said Mr Sisdivachr.
However, if Trump can end the Russia-Ukraine war as he promised, this could lead to increased confidence in global travel, he said.
Industry Minister Akanat Promphan believes Thailand can deal with the indirect impact of Trump’s proposed tariff policy.
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) said Thailand may face an influx of low-cost imports from China if the new US government launches measures to protect domestic industries, leading to increased Chinese dumping in Asian markets.
“The ministry talked with state agencies to devise more solutions to protect Thailand against cheap product imports,” said Mr Akanat.
The minister earlier vowed to push for stricter enforcement of laws controlling substandard products that falsely claim compliance with the Thai Industrial Standards Institute.
The JSCCIB is also worried Thai exports to the US, such as hard disk drives, solar panels and air conditioners, may be affected if Washington increases tariffs.
Mr Akanat said new trade barriers are a concern, but the ministry is not worried because Thailand and the US have a good diplomatic relationship.
Thailand could benefit from increased foreign investment as entrepreneurs may expand or relocate their businesses here to avoid the impact of trade wars, he said.
Trump’s policy to promote fossil fuels, which will lead to more carbon dioxide emissions, would have a short-term impact and should not slow global campaigns against global warming, said Eakarat Samintarapanya, assistant governor for power plant planning at the Electricity Generating Authority of Thailand.
The US may ramp up use of fossil fuels, but Trump’s denial of climate science will lose steam in the long term as the world faces more severe natural disasters, he said. Other countries will continue to act to curb global temperatures, said Mr Eakarat.
Trump vowed to withdraw from the Paris Agreement, which commits signatories to act regarding activities that cause climate change, after Joe Biden rejoined the pact in 2021, according to media reports. During his first term, Trump withdrew the US from the agreement in 2017.
Commerce Minister Pichai Naripthaphan said Trump’s victory could signal the return of his “America First” policy, sparking a new round of the trade war with China.
Thailand’s economy should benefit from the trade war, as the country has good relations with both nations and need not take sides, he said.
US imports of Chinese goods will decline and Thai products should replace them, meaning Thai exports to the US will increase, said Mr Pichai.
He said he hopes for greater US investment in Thailand, citing plans by hard disk producers Seagate and Western Digital to expand their operations here. Increasing foreign investment could have a large impact on the Thai economy, especially exports and GDP growth, said Mr Pichai.
He said the US economy should thrive under Trump thanks to his background in stocks and investment, adding Thailand needs to grasp this chance to increase its attractiveness as an investment destination, while working to lift trade with new partners to expand potential markets.
The ministry has been working to negotiate new free trade agreements.
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said global trade will become more divided, with the two major blocs of the US and China becoming even more distant.
“Thai businesses, especially exporters, must quickly adapt as other external factors could create unpredictable impacts at any time,” he said.
Mr Sanan said Thailand needs to create an investment climate that will spur manufacturing bases in China to relocate here, as well as position itself as a regional logistics hub.
Additional reporting by Phusadee Arunmas, Narumon Kasemsuk and Yuthana Praiwan.