![SCB CIO anticipates manageable economic slowdown in US-Japan next year, China-Vietnam trade dynamics could affect export sector; real estate recovery hindered by prolonged high-interest rates](/img/files/20231201/iq58405965dc75eebcfc445b2ae9aa4b6a.jpg)
The SCB CIO anticipates a moderated economic pace for the US and Japan in 2024, while China-Vietnam may experience a significant slowdown due to challenges in the export and real estate sectors. Fed's interest rate cut is projected for the second half of 2024, prompting investors to cautiously consider riskier assets. However, caution is advised, as maturing bonds in 2024-2025 pose a higher risk of debt rollover, especially in high-yield segments. It is recommended to strategically accumulate investment-grade bonds and consider adding US, Japanese, Indian, and Thai stocks in the quality growth category, characterized by consistent profit growth and a strong balance sheet.
Dr. Kampon Adireksombat, First Senior Vice President and Team Head of the SCB CIO Office at Siam Commercial Bank, outlined four key economic and investment trends for 2024:
The SCB CIO foresees that interest rates have peaked, and historical investment capital concentration in deposits and money markets suggests a shift towards increased risk appetite among investors in 2024. Despite an economic slowdown, interest rates remain relatively high, albeit showing signs of decline. Given elevated debt levels in certain business sectors, the recommendation is for investors to prioritize selection and investment in high-quality asset groups.
In terms of fixed-income investments, historical data indicates that, after a 12-month hiatus in interest rate hikes by the Fed, most assets yield positive average returns. The exception was the year 2000, marked by a technology stock bubble crisis in the US, adversely impacting both stock markets and bonds. Positive returns may also be seen during the initial Fed rate cut, but it is likely to be accompanied by an economic slowdown, potentially increasing the credit spread between returns on private bonds and government bonds, particularly those offering high yields. With a growing number of maturing bonds in 2024-2025, the risk of debt rollover in this segment will rise, emphasizing the recommendation to invest in investment-grade bonds.
Regarding stock investments, the SCB CIO advises the gradual accumulation of stocks in the US, Japanese, Indian, and Thai markets, focusing on the quality growth segments characterized by consistent profit growth and a robust balance sheet. The US stock market stands out due to the anticipation of accelerated company profits in 2024 and the clarity in monetary policy signaling the peak of policy interest rate increases. Defensive stocks resilient to economic conditions should be prioritized. The Japanese stock market offers gradual accumulation opportunities, driven by the expanding performance of listed companies and increased buying power from investors.
In the Indian stock market, gradual investment is recommended based on high economic growth, expanding return on equity (ROE), and attractive stock valuations. The Thai stock market is appealing for its favorable stock value concerning returns versus risks.