Rising political tensions could be a drag on major government projects, particularly the proposed entertainment and casino complex, says the Thai unit of China Galaxy Securities (CGS), prompting the brokerage to lower its Stock Exchange of Thailand (SET) index target for 2025.
Kasem Prunratanamala, head of research at CGS International Securities, said a no-confidence debate is likely to be held during the final week of this month after opposition parties filed a no-confidence motion against Prime Minister Paetongtarn Shinawatra.
"Although we believe the prime minister is likely to survive the debate, political uncertainties may still weigh down the SET in March amid tensions between the incumbent Pheu Thai Party and the Bhumjaithai Party, the second-largest party in the coalition government," Mr Kasem said.
"We think the ongoing conflict could be a drag on some important government initiatives, such as the entertainment complex."
Thailand could also face reciprocal tariffs imposed by US President Donald Trump.
According to the Bank of Thailand, the US is the biggest market for Thai exports, comprising 18% of total exports last year, up from 13% in 2019.
The country's trade surplus with the US surged from 2.5% in 2019 to 6.6% of GDP in 2024, a record high for Thailand.
Thailand ranked 11th in terms of largest trade surpluses with the US last year, surging to US$35 billion, up from $29 billion in 2023, said Mr Kasem, citing data from Worldpopulationreview.com.
"We believe there is risk the US could impose reciprocal taxes on Thai imports," he said.
"While we think Thailand may not be among the first targets of US tariff hikes as its trade surplus with the US is smaller than that of China, Mexico and Vietnam, concerns regarding tariffs could still weigh on the market this month."
Given the strong domestic and global headwinds, CGS downgraded its year-end SET index target from 1,530 points to 1,380 points.
Rising political tension and the imposition of reciprocal taxes on Thailand by the US are downside risks to the revised forecast.
"We believe the downside risk is quite limited. However, we do not see many catalysts in the near term, especially given global and domestic headwinds," said Mr Kasem.
One catalyst is the Finance Ministry's plan to allow some of the remaining long-term equity funds to be eligible for tax deductions of up to 500,000 baht per investor.
However, this effort is unlikely to slow redemptions much as many unitholders hold far more than 500,000 baht, noted the brokerage.