The Investor Confidence Index, which is measured by the Federation of Thai Capital Market Organizations (Fetco), improved to the neutral zone in May from bearish sentiment a month earlier, reflecting hopes that government stimulus would revitalise a slowing economy.
The May index, which anticipates market conditions over the next three months, was in the neutral zone, with the government's stimulus package the most supportive factor, followed by local economic recovery and fund inflows.
The sluggish Thai economy was identified as the main negative factor, followed by the trade war and concerns over fiscal discipline, according to Fetco.
Confidence among retail and proprietary investors was in the bearish zone. Institutional investor confidence was in the neutral zone, while that of foreign investors was bullish.
The banking sector was the most appealing to investors, with automotive the least attractive sector.
"In May, the Thai capital market was volatile due to internal and external factors," said Fetco chairman Kobsak Pootrakool.
Although the US delaying its tariff policy helped ease tension, sluggish local economic growth tarnished sentiment, he said.
The National Economic and Social Development Council downgraded Thailand's 2025 economic growth outlook to 1.8% from 2.8%, while private consumption in the first quarter expanded by only 2.6% and industrial production over the past five quarters edged up 0.5%, said Mr Kobsak.
At the end of May, the Stock Exchange of Thailand index closed at 1,149.18 points, down 4% from the previous month, with an average daily trading volume of 42.5 billion baht.
Foreign investors were net sellers, tallying 16.2 billion baht last month. They cashed out 70.8 billion baht in the first five months of this year.
External factors to monitor include the US trade policy and a potential global economic slowdown as a result of the trade war, according to Fetco.
A trend of higher inflation may affect decisions on whether to cut interest rates among the central banks of major economies, noted the federation.
"Domestic political uncertainty may hurt investor confidence and the government's ability to implement economic policy," said Mr Kobsak.
"In addition, the number of inbound tourists, especially from China, is likely to recover slowly."