Thailand Equity Strategy: Year of Investment takes the stage

Research evidence excerpt

Thailand Equity Strategy: Year of Investment takes the stage

00bn budget for the long-term economic agenda (200bn for economic

transformation and100bn for infrastructure investment - link). We believe the

broad investment momentum will broaden over the next 3-4 years, driven by

the acceleration of major infrastructure projects (Bangkok MRT, AOT airport

expansion, Bangkok–Nong Khai high-speed railway, and Chumphon–Ranong

dual-track railway). Foreign direct investment also surged by 80% y/y in terms

of applications, led by AI/cloud infrastructure, electronic appliances, and other

high-tech industries. Most importantly, the domestic sector seems to be

catching up with the investment - as indicated by the construction index and

domestic machinery and equipment sales (Figure 4…leadstodomesticinvestmentexpansion).

• A corporate capex cycle in the making? Thai corporates have gone through

a cycle of disinvestment over the last three years, with MSCI Thailand seeing

capex falling below depreciation expenses (Figure 5Thaicorporates'capexhasbenbelowreplacementrateforthelast3years). This trend should

inflect in 2026, driven by: (1) strong cash flows from operations; (2) the need

to replenish plant & equipment; and (3) a better outlook with consensus

revising up 2026 earnings growth to ~10% y/y (Figure 1Afterrevisions,ThailandnowhasthehighestEPSgrowthinASEANin2026E). This capex trend,

combined with a low interest rate environment (BOT to hold policy rate at

~1%), should fuel loan growth for Thai banks in the medium term. JPM

ASEAN Banks research team has revised up the 2028 EPS for the Big 4 banks

by an average of ~9%. That said, we believe there exists considerable risk for

this theme to play out, including: relatively high corporate leverage (Debt/

Equity at ~87% currently vs.