Post-poll woes hit investor confidence
Index falls back into neutral territory
Investor confidence for the three months to June has dropped by more than 17%, falling back into neutral territory as post-election government stability proved to be the biggest drag.
The investor confidence index, surveyed by the Federation of Thai Capital Market Organizations (Fetco), dropped 17.7% to 107.53 from 130.68 as the new government's stability weighs down investor confidence, said Fetco chairman Paiboon Nalinthrangkurn.
An index below 80 points is considered bearish, 80-120 is neutral and over 120 is bullish.
"It is difficult to envision post-election government stability, with a coalition government expected to have a range of 245-255 seats," said Mr Paiboon.
"There will be no honeymoon period as the new government's stability is generating a lot of concern."
Investor confidence is also pressured by worries over the Sino-US trade negotiations, US economic conditions and China's economic slowdown, he said.
Other global factors that investors are keeping a close watch on include a slowdown in the EU's interest rate normalisation, the Bank of Japan's loose monetary policy, postponement of the Brexit negotiations and a rise in oil prices following Opec's supply cuts, said Mr Paiboon.
Thailand's stock market became the only regional bourse registering fund outflows, logged at US$407 million (12.9 billion baht) for the first quarter, according to Fetco.
On the contrary, markets receiving the most fund inflows in Asia were India at $7.06 billion, South Korea at $4.54 billion, Taiwan at $4.31 billion, Indonesia at $844 million and the Philippines at $623 million.
The SET index has gained around 4-5% on a year-to-date basis, lower than the 10-11% increase in the MSCI Emerging Markets index and regional average of 11%, said Mr Paiboon.
Terdsak Taweethiratham, vice- president of Asia Plus Securities, said the combined net profit of companies listed on the SET is projected at 250-260 billion baht in the first quarter, up from 156 billion in last year's final quarter but down from 290 billion year-on-year.
A factor limiting the performance of listed companies in the first half of the year is how the amended Labour Protection Act requires the amount of statutory severance pay for employees working for at least 20 years be equivalent to 400 days at the employees' last wage rate from the previous 300 days, said Mr Terdsak.
It is expected listed companies will have to reserve capital worth a combined 24 billion baht for statutory severance pay, he said.
If global interest rates decline, funds will shift from the bond and money markets to stock markets, with the SET poised to benefit from such scenario, said Mr Terdsak.