Political jitters hamstring SET index
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Political jitters hamstring SET index

Political uncertainty is expected to be a major drag on the Stock Exchange of Thailand (SET) for the entirety of June, with three legal cases involving Prime Minister Srettha Thavisin, former premier Thaksin Shinawatra and opposition Move Forward Party (MFP) causing the index to sag deeper than originally forecast, say analysts.

CGS International (Thailand), wholly-owned by China Galaxy Securities, set a lower year-end SET index target of 1,480 points, down from 1,560 points, citing downside risks from political unrest, a further slowdown of the economy and more foreign outflows.

"Three politically charged court cases recently emerged and could form an overhang for the next few months or even longer," said Kasem Prunratanamala, head of Thailand research at CGSI.

Thaksin was accused of lese majeste and computer crimes by the attorney-general, who plans to submit a petition to the court on June 18. This reflects a rift in the ruling coalition, especially between the Pheu Thai and Palang Pracharath parties, he said.

"We believe there is a decent chance Mr Srettha will be found guilty in the case that 40 caretaker senators have petitioned the Constitutional Court, seeking to dismiss Mr Srettha over the appointment of Pichit Chuenban, who previously served six months in jail, as a minister in the Prime Minister's Office," said Mr Kasem.

The Constitutional Court also accepted a petition by the Election Commission to disband the MFP because it was previously found guilty of breaching the charter over efforts to amend the lese majeste law, according to an article in Time magazine.

The brokerage believes the MFP is likely to be disbanded based on this case, he said.

"We believe the mounting political uncertainty will dampen the economy as well as market sentiment," said Mr Kasem.

"Downside risks could come from political unrest, a further slowdown in the economy and more foreign outflows."

KGI Securities (Thailand) said despite global factors turning positive in May, the Thai stock market posted high volatility before closing barely changed from the month before, with selling pressure mounting in the second half.

"In June, we expect the SET index to consolidate at a low level," said KGI senior vice-president Rakpong Chaisuparakul.

In the near term, there are still a few negative factors, led by a political overhang.

If Mr Srettha and his cabinet are found guilty in the case related to the recent cabinet reshuffle, it will necessitate a new cabinet, which could delay stimulus measures, including the digital wallet, he said.

As a consequence, KGI downgraded its 2024 SET index target to 1,491 points to reflect a likely cut in the GDP forecast and the uncertain path of US interest rates, said Mr Rakpong.

Veeravat Virochpoka, head of research at FSS International Investment Advisory Securities, said he expects the legal case involving Mr Srettha to take more than a month to finalise based on a similar suit filed against former premier Prayut Chan-o-cha.

As a result, the SET index could trade in a range of 1,380-1,400 points at best this month, he said.

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