In revealing its investment strategy recommendations for this year's final quarter, SCBS Managing Director & Chief Research Officer Sukit Udomsirikul said that the economic cycle is evolving from reflation to stagflation, signifying a slowing economy but with rising inflation. The market has adjusted the growth outlook downward because of the spread of the COVID-19 Delta variant outbreak and China's growth issues, while raising concerns over rising inflation due to supply chain disruptions. Concerns for an economic slowdown include risks from the Delta variant, issues involving a major Chinese real estate firm, and the Fed's QE tapering dragging down the economy and increasing risks to financial assets. As central banks' total assets decline, market returns will remain relatively low. For China, the tighter regulations imposed on financial institutions will affect high risk businesses, particularly the real estate sector as evident in the case of Evergrande, China's second largest real estate company in China which is at risk of default. Additionally, when the yield curve is adjusted for bear or bull flattening, the overall return on risky assets (including the SET), remains positive but will decline to mere single digits.

Regarding Thai economic trends, the latest Thai economic figures released have shown some improvement after a slow decline in the number of new COVID-19 cases, while the vaccination rate continues to rise to more than 500,000 a day, prompting the government to ease lockdown measures in red provinces. However, economic figures have signaled a significantly worsening adjustment, especially for domestic consumption. Therefore, we maintain our forecast for Thai economic growth at around 1% this year, down from our previous forecast of 2% due to impacts from the latest round of lockdown measures. We believe that the outlook for the Thai economy depends on the COVID-19 situation based on current circumstances. Economic activities have started to resume slowly, similar to projections from the SCBS model.

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SCB - Siam Commercial Bank pcl published this content on 11 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 October 2021 12:01:03 UTC.