Low-yield stocks, slow economic growth and political uncertainty are the three fragile fundamental factors that have discouraged investors from continuing their investment in the Thai stock market, resulting in net outflows of more than 100 billion baht of foreign funds in the first half of 2023, says ttb analytics.
TMBThanachart Bank's think tank believes the country's stock market is entering a bear market, reflected by a continuous decline in the index to below the key resistance level of 1,500 points.
When the Stock Exchange of Thailand (SET) index dropped below 1,500 points, it was the lowest level recorded since April 2021, while trading value was very thin at around 30-40 billion baht per day, compared to a high of 100 billion baht per day.
In addition, foreign investors continued to accumulate net sells throughout the first half of this year of more than 107 billion baht, while the trading volume generated by retail investors, most of whom had net buys, dropped considerably.
The number of active accounts in the first six months fell continuously to only 980,000 accounts per month, compared to as high as 1,300,000 accounts when the market was bustling. The decrease, however, was also driven by the fact that monetary policies were tightening worldwide, prompting foreign funds to flow out of Thailand's stock market, said ttb analytics.
"The phenomenon that foreign investors continue to have a net sell may not be just temporary, because Thailand's fundamentals have become fragile over the past several years," ttb analytics noted.
There are three main factors affecting investment.
Firstly, share prices are expensive, trading is concentrated in specific sectors, and overall returns are low.
Secondly, the economy had begun to decelerate before the pandemic, resulting in a lack of incentive for stock investments. Lastly, the prolonged low level of political stability has dragged down investor confidence.
Since 2013, foreigners have been net sellers in the country's stock market almost every year, including during the election years. Foreigners usually sold some of their stocks in the run up to an election, but then bought them back after the polls.
But this year's election was different as foreigners continued to sell more than 50 billion baht after the May 14 poll. That reflected concerns over political instability, ttb analytics said.
The political instability could lead to a lack of continuity in policy implementation and damage foreign investors' long-term confidence, as evidenced by the steady decline in foreign direct investment after 2013, causing Thailand to lag fellow Asean member states, particularly Vietnam and Indonesia.
Nonetheless, ttb analytics said the SET index has an opportunity to rebound in the second half of this year because the roll out of the new government's economic stimulus policies would help restore confidence once the economy has dealt with shocks.