The Stock Exchange of Thailand (SET) returned to positive territory on Thursday after falling for three consecutive days following Sunday's election, with the victorious Move Forward Party (MFP) announcing a plan to form a coalition government with 313 members of parliament.
The SET index joined a regional rally among Asian bourses, tracking overnight gains on Wall Street, as concerns about a US debt default subsided. Market sentiment expects United States President Joe Biden and House Speaker Kevin McCarthy, political opponents, to reach an agreement on a debt ceiling extension by Sunday, according to analysts.
Locally, investors took heart as political concerns eased about the MFP's prospects of forming a government when two more parties joined the coalition, said Koraphat Vorachet, capital market fundamental investment analyst at Krungsri Capital Securities.
MFP leader Pita Limjaroenrat sought to reassure Thai voters, investors and markets on Thursday about his budding coalition's ability to form a government.
Forming an alliance with seven other parties, the MFP-led coalition has 313 of the 376 votes needed to make Mr Pita prime minister.
Pita Limjaroenrat, leader of the Move Forward Party, waves to supporters of the party on Wednesday at a gathering of political parties in Bangkok. (Photo: Wichan Charoenkiatpakul)
Uncertainty regarding post-election politics was among the reasons the SET index fell nearly 40 points from May 15-17, including the loss of 17 points on Wednesday.
The Thai bourse rose by more than 1% in early trading hours on Thursday, but gains lessened later in the day.
The SET index finished at 1,526.69 points on Thursday, up 0.26%, in trade worth 54.8 billion baht.
"If the Pheu Thai Party takes the lead in managing the economic policies of the new government, it would add positive sentiment to the stock market," said Mr Koraphat.
Analysts from Maybank Securities, Globlex Securities and Thanachart Securities agreed, noting that a clearer local political situation was a positive factor lifting the stock market on Thursday.
"The agreement announced by eight political parties with 313 MPs to work together gives a clearer picture of the formation of a new government in the next stage," said Thanachart in a research note.
According to Asia Plus Securities (ASPS), the SET index fell five days in a row, dipping from gains of 3% month-to-date earlier in May to 0.42% month-to-date now.
The decline was attributed to concern over political stability, economic policies and the transition to a new government, said the brokerage. Large-cap stocks declined more than the average.
"The SET index will probably fluctuate until the first parliamentary session [in the first or second week of July], in line with projections on government formation and votes for prime minister," ASPS said in a research note on Thursday.