Assets viewed as reliable in wartime
Thailand’s leading asset managers are recommending investors increase their exposure to gold and oil as geopolitical tensions in the Middle East intensify, while the country’s securities regulator says it is monitoring market stability amid heightened volatility.
UOB Asset Management (Thailand) (UOBAM) believes gold and crude oil prices are likely to remain supported in the near term, though the sustainability of gains will depend on three critical factors: whether military strikes target energy infrastructure, whether Iran is able to shut down the Strait of Hormuz, and whether China and Russia escalate their involvement.
The firm noted the current conflict differs from previous flare-ups due to its apparent political objective, which involves regime change in Iran. Such a development may prolong hostilities and amplify global economic repercussions.
SCENARIOS
UOBAM outlined three potential phases in the Middle East conflicts. A quick resolution without broader regional spillover (60% probability) would result in Brent crude trading at US$75-80 per barrel.
Inflation pressures would remain contained, and equity markets may experience only short-term volatility. In this scenario, investors are advised to hold gold and oil as hedges while selectively accumulating equities on market weakness, noted the asset manager.
If the war is prolonged and fighting lasts for weeks or involves a partial closure of the Strait of Hormuz (30%), Brent crude could remain above $80 for several months. Rising energy costs may accelerate inflation, limiting the US Federal Reserve’s room to cut rates and raising the risk of stagflation, said UOBAM.
Portfolio strategy under this scenario favours higher allocations to gold and oil, reduced equity exposure, and a focus on quality and defensive stocks, noted the asset manager.
In a worst-case scenario involving a broader regional war (10%), which is described as tail risk, oil prices could surge above $100 per barrel, triggering a supply shock and pushing the global economy towards recession, said UOBAM.
“In this scenario, investors are advised to significantly reduce equity holdings and increase allocations to gold, energy assets, and high-quality bonds to preserve capital,” said the firm.
RISK ROTATION
Nuttachart Mekmasin, executive director of research at Trinity Securities, said Thai equities are vulnerable to global risk rotation as capital shifts towards safe-haven assets.
Trinity expects funds to flow into bonds, gold and commodities, potentially supporting upstream energy stocks in the short term, but cautions that upside for the Stock Exchange of Thailand (SET) index remains limited given already stretched valuations.
Gold and oil remain key hedging instruments amid geopolitical uncertainty. While Thai markets are not facing disorderly conditions, elevated global risks argue for flexible asset allocation, selective equity exposure and increased safe-haven positioning as the conflict evolves, he said.
CGS International Securities maintains a subdued macroeconomic outlook, projecting Thai GDP growth of 1.9% this year. Although domestic consumption and investment have shown resilience, much of the recent momentum has been stimulus-driven, while external uncertainties persist.
The Securities and Exchange Commission (SEC) said it is tracking developments in the Middle East and assessing potential impacts on capital markets.
Pornanong Budsaratragoon, secretary-general of the SEC, said the SET, Market for Alternative Investment, Thailand Futures Exchange, LiVEx and the Thai Digital Asset Exchange continue to operate normally. The SEC is ready to deploy market-stabilising measures if necessary, she said, urging investors to rely on credible information sources and assess risks carefully.
