After losing 3% last week, the Stock Exchange of Thailand (SET) index is likely to remain on a downward trend amid lingering concerns and fiscal uncertainties after the general election, analysts say.
The SET index lost 24 points to slip below 1,500 points in early morning trade on Monday, against rallies of regional stock markets amid optimism regarding US-China ties, while US debt ceiling talks were slated to resume. However, Thai shares recovered and finished in the green by midday, and then closed at 1,529.24 points on Monday, up 0.95%, in trade worth 55.5 billion baht.
"Thailand has so far underperformed other Asian stocks, mainly due to political uncertainties. The MSCI-ex Japan index has gained 2% this year to date while Thai shares lost 9% during the period," said Nattapol Kamthakrua, director of the securities analysis department at Yuanta Securities (Thailand).
"So far, Thai shares have been sold due to fears that the policies of the new coalition government would affect the profit-generating capacity of listed companies. Election rallies have been delayed and I think we have to wait until the name of the new prime minister is known for Thai shares to gain ground and rebound significantly."
Globlex Securities noted that investors were buying back Thai shares after their valuation dropped 14.5-15.0 times in morning trade. While waiting for the Move Forward Party-led coalition parties to announce their memorandum of understanding late in the afternoon, there were speculative buys that pushed the index to close 0.15% higher at the lunch break.
KGI Securities said in its research on Monday that it is likely that foreign outflows would continue, notably in light of renewed policy uncertainties from the US Federal Reserve and Friday's news that negotiations on the US debt ceiling may require more time as both sides hit another wall.
"In our view, Thai political uncertainties will remain until the opening of the parliamentary session, which should be in early June," it noted.
Meanwhile, Fitch Ratings noted that a "broad, fragmented coalition government could emerge" after the election, and that would "complicate effective policymaking".
"The fiscal policy outlook is uncertain. There could be some disruption to spending under the budget for the fiscal year ending September 2024 if coalition negotiations drag on," the credit rating agency noted.
Delays to the 2024 fiscal year budget would be negative for the country's economic prospects, but Fitch Ratings said it would still expect growth to accelerate in 2023 and remain robust in 2024, with the tourism sector's recovery and private consumption serving as the main drivers. However, it added that it assumed the next coalition government would remain committed to some of the outgoing administration's key policies.