The Thai unit of CGS-CIMB Securities, majority-owned by the Chinese government, has downgraded its forecast for the Stock Exchange of Thailand (SET) index at year-end from 1,720 points to 1,550 points, citing the country's policy risks.
Kasem Prunratanamala, head of Thailand research at the brokerage, said the government's recent efforts to introduce several policies have increased risks as some "are not well thought out and lack clear implementation plans".
"Moreover, there appears to be some conflict between the government and the central bank, which we believe does not bode well for investor confidence," he said.
Given the policy risks, investors are likely to stay on the sidelines and wait for a clearer outlook, according to CGS-CIMB, leading the brokerage to cut its year-end SET index forecast from 1,720 points to 1,550, with a target for 2024 of 1,700 points.
"The downside risks to our SET target are increased conflict between the government and the central bank, delays in government stimulus measures, weak tourist arrivals in the fourth quarter and poor exports," said Mr Kasem.
The brokerage noted foreign investors have been net sellers every month this year other than January. Year-to-date net outflows for this segment totalled US$4.5 billion.
Foreigners have also been net sellers of Thai bonds amounting to $4.3 billion over the same period, attributed to political uncertainty, according to CGS-CIMB.
In the same period of 2022, the Thai bond market recorded net foreign inflows of 46 billion baht ($1.4 billion), according to the Thai Bond Market Association.
CGS-CIMB predicts earnings per share (EPS) for the Thai market to decline 5% year-on-year in 2023, largely because of a sharp drop in the energy and petrochemical sectors.