The Stock Exchange of Thailand (SET) dipped in the afternoon session on Wednesday, wiping out the morning’s gains, as the Constitutional Court dismissed Prime Minister Srettha Thavisin over a cabinet reshuffle, though analysts said the downside would be limited.
The ruling came as a surprise to the majority of market analysts who believed the court would clear Mr Srettha of an ethical breach for appointing Pichit Chuenban, a former lawyer for the politically powerful Shinawatra family, as a cabinet minister in April.
The SET index plunged by 1.3% to 1,281 points in early afternoon trade, after surpassing 1,300 in the morning session, before rebounding later but remaining in negative territory.
“This is the worse case of our forecast, creating a short-term vacuum,” said Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, after the court dismissed Mr Srettha from office.
The ruling means that the entire cabinet must also stand down, though ministers can continue to serve in a caretaker role.
The first House meeting to choose a new prime minister is tentatively scheduled for Friday. But even if lawmakers can agree on a new PM, it is not known how long the selection of a new cabinet will take.
The verdict is considered a worse-case scenario in terms of investment because the disqualification of the cabinet will cause various policies to stall for a while, Mr Therdsak added.
“Nevertheless, the political vacuum should not last long since the coalition parties have a solid alliance, and most of the government’s main policies should be continued,” he said.
Amid domestic political uncertainty, the Thai index has declined by 5% on average in the past three months, underperforming global markets. Thus, the bourse has limited downside, so it should rebound shortly after, he added.
Prakit Siriwattanaket, managing director of Merchant Partners Asset Management, believes the Pheu Thai Party is preparing to propose a new prime minister from the existing coalition parties.
“This will affect market sentiment in the short term,” he said. “Investors like peace. As long as Thai politics are not stable, investors will continue to invest in stock markets overseas to avoid fluctuations here.”
Soraphol Veerametheekul, head strategist at Kasikorn Securities, said the SET index is expected to decrease by about 20 points to 1,280 and the baht to weaken slightly in the short term until the political picture clears.
“However, the Aug 14 ruling makes Thai politics clearer for foreign investors who previously were underweight on the Thai stock market,” he said. “They will probably wait until the new government is announced or takes office.”