The domestic political situation will be the main factor as the SET index drops to a range of 1,150-1,200 in the near term, with a rebound unlikely until the second half, says Asset Plus Securities.
Ratch Sodsatit, the newly appointed managing director, expects resistance at 1,450-1,500 once the market recovers.
With the uncertainty damaging market sentiment, stocks have become cheap: the market's price-to-earnings ratio of 11.5 is on a par with P/E in the Philippines and Indonesia.
During the Lehman Brothers crisis in 2008, however, the SET's P/E hovered around 9-10 _ far lower than in the current political crisis.
Mr Ratch said foreign funds began dumping Thai shares in 2013 after being net buyers for four years. Those remaining in the market are long-term investors.
"We forecast the Thai stock market will bottom out soon, now that foreign investors have sold almost all of what they bought in the past four years," said Mr Ratch. "That's why when the index drops to 1,200 or below, fund managers will consider buying again."
The SET index could rebound to a P/E level of 12-14 if the world economy recovers and the uncertainty surrounding US quantitative easing is resolved.
Asset Plus expects Thai listed earnings to grow by 10% this year, down from 15% growth in 2013.
The company plans to launch 10 funds in 2014, including actively managed and target funds. Most will focus on global equity markets _ especially in Europe, where a strong recovery is anticipated.
Japan is intriguing because of stimulus measures aimed at weakening the yen and boosting economic growth. The US is also firmly on a growth path, and China has carried out reforms that will help sustain long-term growth.
Mr Ratch said Asset Plus will focus on high net worth investors.