The Stock Exchange of Thailand (SET) index could dip to around 1,470 points if a new government cannot be formed until May 2024 when the Senate's term ends, dealing a blow to fiscal budget disbursement over the next three years.
If the Pheu Thai Party and the Move Forward Party (MFP) stay together and declare themselves as the opposition or wait until the Senate's term finishes in May next year to form the new government, ASL Securities expects the SET index to move in a range of 1,470 to 1,510 points.
That is the worst-case scenario that would affect fiscal budget allocation over the next three years and also overall economic growth, the brokerage said in a research note issued on Wednesday.
The forecast was made after House Speaker Wan Muhamad Noor Matha late on Tuesday postponed the second vote for Prime Minister, earlier scheduled for July 27, to await the Constitutional Court's verdict regarding the repeated nomination of MFP leader Pita Limjaroenrat. It is expected that the court would rule on the matter within five days.
"In the worst case, the SET would face downside risks, falling within a support level of 1,470 points. Under that scenario, the preparation of the annual budget would be affected for three years from 2024 to 2026, hurting overall economic growth," ASL's research department said.
Meanwhile, most Asian stocks declined on Wednesday after Wall Street hit a 15-month high, amid hope that the Federal Reserve would make the final increase in this interest rate cycle.
Investors expected the Fed to lift its key lending rate on Wednesday by 0.25% to a 22-year high as the central bank attempts to manage a "soft landing" for the US economy by extinguishing inflation while avoiding a recession.
Kasikorn Research Center said the final increase would bring US rates to 5.25-5.50%, as inflation has cooled even though employment continues to rise.
Kasikorn Asset Management said the increase in the Fed rate would prompt the Bank of Thailand to also lift interest rates by 0.25% to 2.25%. Inflation has clearly started to decline in many countries while other key economic data such as the unemployment rate and the purchasing managers' index slowed down, reflecting the likelihood of a recession.