The SET Index fell by 33.91 points, or 2.1% to close on Wednesday at 1,549.22 points, dragged lower by US tech share and local share selloffs as local concerns also grow over the government's debt moratorium.
The Investor Confidence Index (ICI) for the next three months also tumbled by 14.6% from the previous month to 124.37 -- still remaining in the bullish zone -- dragged down by short-term concerns over rising Covid-19 cases.
Natapon Khamthakrul, vice-president at Yuanta Securities said the market is worried that if the cabinet approved the debt moratorium for government banks, private banks may need to follow suit and therefore face more financial burden as they still need to continue preparing for a loan loss reserve.
"The overall sentiment is weak as bank stocks contributed about 15% of the market cap. The market is also facing pressure from the psychological 'Sell in May' factor," he said.
However, he said the market selloff on Wednesday reflects portfolio adjustments as the Covid-19 cases rose again from 1,500 last Friday to about 2,000 cases.
He said the market still has enough liquidity as mid and small share prices can increase. The SET Index is expected to move sideways with support lines at 1,540 and 1,550 points and resistance lines at about 1,580 and 1,590 points.
The resistance line is not expected to surpass 1,600 points or reach a new high.
According to the Thai Capital Market Organization (Fetco), the ICI for the next three months fell by 14.6% from the previous month to 124.37 though it still remained bullish as investors have high hopes regarding vaccine rollouts and this positive factor helped slow declining market sentiment.
Meanwhile, the latest resurgence of the pandemic in Thailand, economic recession, and rising household debt are the top negative factors hurting investor confidence, said Paiboon Nalinthrangkurn, chairman of Fetco.
The third wave of the pandemic has hurt Asian stock markets overall, which posted the lowest returns among global stock markets as some Asean countries like Indonesia, the Philippines, and Malaysia are still struggling to control outbreaks.
According to Fetco, the severity of the outbreak in Thailand is still moderate compared to neighbours in the region. The worrying Covid-19 situation has decreased fund inflows into regional markets as the outbreak has jeopardised these countries' reopening plans for tourism and export income, which in turn is hampering their economic recoveries.
Fetco also downgraded its forecast for Thailand's GDP this year to 1.5-2.5% from the previous forecast of 2.7% due to the impact from the third wave while GDP in 2022 is expected to grow by 4%.
Singapore and Vietnam are the only two countries in the region with good prospects for recovery because Singapore has succeeded in inoculating most of its population while Vietnam has a good handle on the pandemic.
However, Mr Paiboon expects the Thai economy to recover in the second half of the year thanks to vaccine rollouts that will attract more fund inflows and the country could see a full economic recovery next year when everyone has been vaccinated.
According to the survey, the most attractive sector is petrochemicals and chemicals while the least attractive is fashion. The strongest factor supporting the Thai stock market is vaccine distribution and the strongest impeding factor is the resurgence of Covid-19.
The Thai bourse has benefited from the government's additional vaccine procurement plan, the Bank of Thailand's 350-billion baht assistance measures for businesses affected by the pandemic, and the 8.5% year-on-year expansion of Thailand's March 2021 exports.
Meanwhile, overseas factors to closely monitor include the US government's economic stimulus package and its plan to raise corporate and personal income tax rates as well as the Chinese economy which grew 18.3% year-on-year in the first quarter of 2021.
In addition, the emergence of a new Covid-19 variant in India and lockdowns in many countries such as Japan and Germany are also critical factors that could impact the global economy.
In terms of domestic factors, investors are urged to keep an eye on the pandemic, which is a key risk factor for the local economy, the procurement of additional vaccine supplies, speeding up the vaccination rate to create herd immunity, the state's additional economic stimulus measures for businesses that closed down during the outbreak, and listed firms' performances in the first quarter, said Mr Paiboon.