Analysts caution banking stocks at risk of volatility

Analysts are warning that banking stocks could be volatile following a policy rate cut of 25 basis points (bps) by the Bank of Thailand and a downgrade of Thailand's economic outlook by Moody's.

- NUNTAWUN POLKUAMDEE

Bualuang Securities (BLS) said the rate cut on Wednesday initially prompted a 2.3% rebound in the SETBANK index. The gain was likely a “buy-on-fact” reaction, following a 5% decline in April due to concerns over an economic slowdown and anticipated monetary easing.

Conversely, the SETFIN index, which tracks non-bank financial firms, fell 1.6% on the same day, reflecting a “sell-on-fact” move after a 2% rise in April on speculation of a rate cut.

BLS expects the central bank's Monetary Policy Committee to slash the rate by another 25 bps in the second half of the year, putting the year-end policy rate at 1.5%.

Each rate cut of 25 bps is estimated to shave 4% off the banking sector’s full-year earnings, with Bangkok Bank (BBL), Krungthai Bank (KTB), Kiatnakin Phatra Bank (KKP) and Kasikornbank (KBANK) among the most affected, according to the brokerage.