The Stock Exchange of Thailand (SET) index could plunge to 1,250-1,260 points, down from about 1,300 points now, if the Constitutional Court rules Prime Minister Srettha Thavisin breached ethics rules when appointing Pichit Chuenban, which is likely, says CGI International Securities (Thailand).
The Thai index rebounded yesterday, rising 0.98% to 1,307.38 points by mid-day, after slipping below a key psychological level of 1,300 points since July 1.
The increase was mainly attributed to external factors, as weaker than expected US economic data raises the probability the Federal Reserve might cut interest rates in September.
On the domestic side, political overhang will continue to limit market gain after the Constitutional Court on Wednesday deliberated on the Move Forward Party's dissolution case and set the next hearing date for July 17, said Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand).
On July 10, the court is set for the first hearing of the case regarding the status of Mr Srettha and whether the latest cabinet reshuffle appointing Pichit as PM's Office Minister violated the charter.
Teerasak Tanavarakul, first vice-president of retail research at CGI International, said there is a possibility the premier could be found guilty in the case filed by 40 caretaker senators.
"If so, Paetongtarn [Shinawatra], the leader of Pheu Thai Party, would be named the new prime minister. In that event, we foresee the SET index falling to test the level of 1,250-1,260 points before bouncing back," he said.
According to Asia Plus Securities (ASPS), foreigners were net sellers of Thai stocks worth 34.8 billion baht in June and 2.48 billion baht this month to date, causing the Thai index to fall 3.3% in June and 1% month to date.
As the 2024 budget was expanded to drive the economy via the 10,000-baht digital wallet, the main concern revolves around the government's debt repayment ability, said the brokerage.
Public debt was 11.7 trillion baht at the end of May, equal to 64.3% of the 2024 GDP forecast of 18.1 trillion.
"Market earnings are projected to have strong growth year-on-year, boosting the SET index, yet political risks remain," ASPS said in a research note.
The Thai index is still weak and volatile as trading value is thin and fund outflows continue, the brokerage added.