Foreign investors flee Thai shares ahead of March election

Foreign investors flee Thai shares ahead of March election

Foreign investors have sold a net 10.5 billion baht of Thai shares since Feb 8 as worries about potential political instability grip the nation ahead of the March 24 election. (Photo by Patipat Janthong)
Foreign investors have sold a net 10.5 billion baht of Thai shares since Feb 8 as worries about potential political instability grip the nation ahead of the March 24 election. (Photo by Patipat Janthong)

Foreign investors have dumped 10.5 billion baht in Thai equities in seven straight sessions, the longest losing streak in more than two months, as worries about potential political instability grip the nation ahead of elections in March.

The Stock Exchange of Thailand main index has lost about 175 billion baht of its market value since the surprise, short-lived entry of the sister of His Majesty the King into politics threw the election into turmoil.

On Feb 8, Princess Ubolratana stunned the nation with her candidacy for prime minister for the Thak Raksa Chart Party that is loyal to ousted ex-premier Thaksin Shinawatra.

But the King blocked her bid, with the party facing dissolution ahead of the election on March 24, the first since a 2014 military coup.

Since then, foreign investors have sold a net 10.5 billion baht of Thai shares. In November, foreign net selling was 9.3 billion baht over an eight-session period.

Until recently, overseas inventors had bought a net 8.3 billion baht of Thai shares between Jan 1 and Feb 7.

After Feb 7, things turned down with foreign sales of 2.3 billion baht for the year-to-date. In 2018, foreign net selling was nearly 300 billion baht.

Investors may return after the election, fund managers say.

"That's because of political uncertainty. The political heat is still here," said Prapas Tonpibulsak, chief investment officer of Talis Asset Management.

"Some investors may want to sell some and are in no rush to come back until there is clarity after the poll," he said.

Thai stocks are still a good bet because economic fundamentals remain solid, with growth of more than 3% expected this year, said Saharat Chudsuwan, head of marketing and wealth advisory of TISCO Asset Management.

"This is just political noise and it will go away," he said.

The key risk for the economy is the possibility of violent protests ahead of the elections, said Capital Economics.

"Another outbreak of protests and violent conflict, would deal a significant blow to the economy," it said, estimating that the last outbreak of violence in 2013-2014 knocked around 0.7 percentage point off economic growth.

Southeast Asia's second-largest economy grew slightly faster than expected in the fourth quarter, with 2018 growth of 4.1%-- the fastest pace in six years.

But growth this year could be hurt by politics.

"We maintain our forecast of below-potential GDP growth of 3.7% in 2019, with downside risks increasing from export slowdown and political uncertainty," said Charnon Boonnuch, economist of Nomura in Singapore.



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