Domestic political risk is rising after Sunday's election, as there are close vote counts for key political parties and a fragile government coalition is likely because the leading group has an estimate of less than 250 MPs, says Kasikorn Securities (KS).
Whether the pro-junta Palang Pracharath Party (PPRP) or the pro-Thaksin Pheu Thai Party sets up a government coalition, either would experience instability because each side's estimated MP total is below 250, said Passakorn Linmaneechote, head of research and strategy at KS.
Late Monday afternoon, the Election Commission (EC) announced that Pheu Thai's unofficial tally of constituency seats stood at 137, compared with the PPRP's 97. Pheu Thai is estimated to have zero party-list MPs, while the estimate for the PPRP is 19.
Pheu Thai needs help from other parties to garner the 251 votes to nominate a prime minister, who is then subject to a vote from the 500 MPs together with the 250 senators.
Official election results will be announced by May 9.
The PPRP is expected to be able to form a government coalition if the Bhumjaithai Party and the Democrat Party join it, Mr Passakorn said.
Conservative economic policies are likely to be implemented under the PPRP-led coalition, while a Pheu Thai-led coalition would embark on populist economic policies, he said.
Anutin: Party has 39 constituency seats
Vorawan Tarapoom, chairwoman of BBL Asset Management, said attention is focused on which party can form a coalition government first, with Bhumjaithai as an important variable, but there are concerns over a possible political deadlock given the protracted formation period.
Bhumjaithai, led by billionaire politician Anutin Charnvirakul, has already won 39 seats for constituency MPs.
Shares of SET-listed Sino-Thai Engineering and Construction Plc (STEC) and steelmaker STP&I Plc, where Mr Anutin is among the major shareholders, continue to rise as investors speculate on whether the party will be part of a PPRP-led coalition.
STEC has sound finances and low liabilities, along with good political connections, leaving the company in a strong position to receive future concession projects, Mr Passakorn said.
Mrs Vorawan said the new government should have at least 275 MPs in the lower house for administrative and legislative stability.
"Political clouds could affect the Thai capital market in the short run because government formation is expected around June, but listed companies' earnings and earnings per share growth still remain as medium- and long-term growth drivers," she said.
"Political parties should compete in forming a government coalition and announce the results to the public. Colour-coded political conflicts are over and generational warfare is ensuing."
Stock Exchange of Thailand president Pakorn Peetathawatchai said that while it's unknown which party will succeed in forming a governing coalition, the economic policies of the two parties that have garnered the most votes don't differ much and are focused on sustainable growth and encouraging private investment.
Some 200-300 billion baht worth of state investment budget earmarked for the late third and early fourth quarters would be pumped into the system if the new government were formed rapidly, said Thanawat Phonvichai, director of the Center for Economic and Business Forecasting at the University of the Thai Chamber of Commerce.
The PPRP can form a new government if the party and its allies have a combined 260 seats in the lower house, but the coalition government's stability will be strengthened if it manages to control more than 280 seats in total, Mr Thanawat said.