Experts warn stock market rally likely short-lived

Economy December 03, 2018 17:25

By The Nation

The stock market rally following a truce in the US-China trade war may be short-lived, experts said on Monday.



The Stock Exchange of Thailand (SET) Index rose sharply in Monday trade, along with other markets in Asia, following US President Donald Trump and Chinese President Xi Jinping agreeing at the G-20 summit over the weekend not to further impose high tariff rates between the two economic powerhouses for 90 days. 

The SET rose 1.88 per cent in afternoon trade to close at 1,672.61 points. 

Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said that it may however only be a short-term rally. 

“Investors would like to celebrate Christmas and New Year with some good news, but we know that this is not a peace treaty, and people shortly will come to that realisation,” he suggested.

There will now be another tense period of three months for further US-China negotiations, and the market is watching to see if China can comply with the US demands, which looks very difficult with regard to intellectual property rights, he added. 

There are two reasons for the market rallying across Asia, one is that it had sharply dropped previously and the other that investors are in a good mood following the trade-war truce, said Prinn Panitchpakdi, managing director at CLSA Securities. 

“But the market recovery is fragile as the trade war will not come to an end easily, as Trump often moves unpredictably,” he said. 

Moreover, investors have to watch the US Federal Reserve’s move on interest-rate policy in the next two weeks, and a further rate hike would adversely affect the markets, he warned.