Scandals related to Stark Corporation and other negative factors caused the trading value of the Stock Exchange of Thailand (SET) to plummet by 33% year-on-year in June to 47.9 billion baht, but the bourse remains optimistic that investor confidence will improve in the second half.
Soraphol Tulayasathien, senior executive vice-president of the SET, said a spate of factors lowered investor confidence this year, including bond defaults by listed companies, such as Stark.
"Concerns about investment in the bond and equity markets triggered a sell-off in small and mid-cap stocks," he said. "Returns in each asset class suggested that investors were more enthusiastic about risk assets, particularly large-cap technology stocks as well as high-yield bonds."
At the end of June, the Thai index fell 2% from the previous month and 9.9% from the end of 2022 to close at 1,503.10 points, moving in line with other market indices in Asean.
Average daily trading value in June for the SET and Market for Alternative Investment dropped 33.2% year-on-year to 47.9 billion baht.
Both markets' trading value averaged 58.7 billion baht a day for the first six months of this year.
Foreign investors were net sellers for the fifth straight month in June worth 8.62 billion baht. Yet their trading ratio remained higher than any other type of investor for 14 consecutive months.
"However, developments in local politics after the new House speaker was selected helped indices gain some ground, as the SET's forward price-to-earnings [P/E] ratio is lower than the historical average, attracting some local individual and institutional investors to have a net buy position over the first six months of 2023," said Mr Soraphol.
Investment trends point to optimism about the reduced possibility of a hard landing for the global economy, he said.
Moreover, analysts predict large-scale fiscal stimulus measures to revitalise China's bleak economy, with Thai listed companies exposed to China and the tourism sector benefiting if that is the case, said Mr Soraphol.
The World Bank upgraded Thailand's growth outlook in 2023 to 3.9% from 2.6% last year, underpinned by a rebound in tourism and domestic consumption.
"Market sentiment will improve in the second half as tourism is entering the high season and external uncertainties will subside, including interest rate hikes," said SET president Pakorn Peetathawatchai.
The Thai stock exchange's forward P/E ratio at the end of June was 16.0 times, above the Asian stock market's average of 12.8 times.
The historical P/E ratio is 20.6 times, exceeding the Asian stock market's average of 14.2 times.
The SET's dividend yield ratio is 3.22%, below the Asian stock market's average of 3.38%.
The daily trading volume of the Thailand Futures Exchange (TFEX) in June averaged 608,801 contracts, up 21.4% from the previous month largely attributed to the rise in volume of SET50 Index Futures and Single Stock Futures.
TFEX's daily trading volume declined 2.2% over the same period last year to 558,565 contracts, mainly because of the lower trading volume of Single Stock Futures.