The Stock Exchange of Thailand (SET) index bucked pessimism arising from Thursday's court ruling to dissolve the Thai Raksa Chart Party, with election momentum poised to drive the benchmark upward.
The Constitutional Court unanimously ordered the dissolution of Thai Raksa Chart for nominating Princess Ubolratana as its prime ministerial candidate on Feb 8, saying the move "undermines the rule of constitutional monarchy or compromises the political neutrality of the monarchy".
Earlier, the Election Commission formally requested the court dissolve the party, citing a clause in Section 92 of the 2017 organic law on parties that lets the commission propose the dissolution of a political party if there is enough evidence that it committed an act deemed hostile to the monarchy.
But the latest political development ahead of the March 24 general election had no adverse effect on investor sentiment as Thailand's bourse gained 0.47% on Thursday from Wednesday's close.
The SET index closed at 1,633.21 points, up 7.70 points, in turnover worth 38.6 billion baht. Retail investors were net buyers of 748.1 million baht and institutional investors bought 355.1 million worth of shares.
Thai Raksa Chart's dissolution is in line with market expectations, but the court's ruling did not affect the scheduled election date, said Asia Plus Securities vice-president Terdsak Taweethiratham.
People wanting to cast their votes for Thai Raksa Chart can choose other affiliated political parties, Mr Terdsak said.
Thai Raksa Chart is viewed as an offshoot of the Pheu Thai Party and was established about a decade ago before rebranding and relaunching late last year.
"Those wanting to vote for Thai Raksa Chart can vote for other parties," said Finance Minister Apisak Tantivorawong.
"This does not damage the economy nor confidence because the March 24 election will still take place."
According to historical data, the SET index climbs an average of 4.8% for the first week after Thailand's previous general elections, Mr Terdsak said.
Factors pressuring capital outflows from the bourse are rather how foreign investors have taken profits from bonds and equities following the baht's depreciation, with foreign funds overweighting China's capital market as the MSCI emerging markets index will include more large-cap Chinese equities, he said.
Tisco Securities chief executive Paiboon Nalinthrangkurn said the court's ruling did not affect Thailand's stock market because investors still view the upcoming election as remaining tranquil.
They prefer to look beyond the election to assess their investment incentives, he said.
"The business sector is not panicked about the court's ruling. This case has no impact on the domestic economy, but if there is a protest and violence erupts after the general election, this would take a toll on the economy," said Supant Mongkolsuthree, chairman of the Federation of Thai Industries.
Uncertainty in the year
Although investors were not unnerved by the party dissolution, domestic political stability and Thailand's economic growth momentum are anticipated to face an uphill task in the post-election period.
The court's ruling to dissolve Thai Raksa Chart puts the Pheu Thai Party in a difficult position as Pheu Thai wanted to garner votes from party list MP candidates fielded by Thai Raksa Chart, said Somjai Phagaphasvivat, an academic at Thammasat University.
The ruling could give an edge to the pro-junta Palang Pracharath Party and the Democrat Party if they decide to form a coalition government, Mr Somjai said.
But such a scenario could result in greater uncertainty.
If the Democrats collect more votes than Palang Pracharath, it remains to be seen whether the Democrats would agree to Palang Pracharath being the leading party in a coalition and nominating Gen Prayut Chan-o-cha as prime minister, he said.
The 250 selected senators will also determine who will become the next prime minister, said Mr Somjai.
"Uncertainty remains writ large," he said. "Investors cannot be assured about the unity or stability of a new government."
The upcoming election could derail confidence among investors and consumers instead of enhancing it, Mr Somjai said.
Economic conditions are on the verge of a greater slowdown than four years ago based on prevailing external headwinds, while social pressure is poised to rise as Section 44 of the interim constitution, which grants the junta leader absolute power to give any order, will no longer exist after the election, Mr Somjai said.