The investor confidence index retreated to bearish territory for the first time in eight months in May as political conflicts and an economic slowdown undermined sentiment, suppressing the positive impact of a tourism recovery, says the Federation of Thai Capital Market Organizations (Fetco).
Fetco chairman Kobsak Pootrakool said the May index, which anticipates market conditions over the next three months, was 77.70, down 26.8% from the previous month. The survey was conducted from May 22-31, a week after the general election.
"The formation of a new government would be the most supportive factor to lift confidence, followed by the tourism recovery and a local economic rebound. Investors are concerned about post-election political conflicts, a local economic pause and a planned financial transaction tax on securities trades on the Stock Exchange of Thailand [SET]," said Mr Kobsak.
The survey results indicated only proprietary investors were positive about sentiment, rising 14.3% to 100, while the confidence of three other groups of investors dipped. Retail investor confidence fell 24% to 73.61, while that of institutional investors dropped 18.5% to 91.67 and foreign investor confidence contracted 40% to 75.00.
"The largest boost to the Thai bourse would come from the formation of a new government, while the greatest impediment to sentiment is post-election conflict," he said.
Prior to the election on May 14, the SET index continued to rise, bucking the global trend as investors worried about an economic slowdown and the delay in raising the US debt ceiling.
However, the Thai benchmark index swooned after the election, dragged down by concerns over formation of a new government and the direction of economic policy, said Mr Kobsak.
The SET index closed at 1,533.54 at the end of May, up 0.3% from the previous month. Foreign investors continued to unload Thai shares for the fourth consecutive month with 33.1 billion baht worth of net selling.
Year-to-date, foreign investors totalled net selling of roughly 97 billion baht.
He said inflation in major economies should be monitored as it may accelerate in the latter half of this year, pressuring central banks to raise their policy rates.
"This would impact the global economic slowdown. In addition, geopolitical conflicts remain, while economists focus on how China's sluggish economic growth will unfold. Domestically, all eyes are on the new government formation," Mr Kobsak said.
"The longer it takes to form a government, the greater the concern as it will affect the approval of the budget bill for fiscal 2024."
He said investors require clarity on economic policies from the planned coalition government, including a stimulus package for consumption, a minimum wage hike, and reductions to electricity bills.
Several questions also remain about tax-related policies, said Mr Kobsak.