The Stock Exchange of Thailand (SET) surged almost 40 points yesterday on the back of upbeat sentiment stemming from the recent royal endorsement of the last two of 10 organic bills paving the way for February's general election.
"Clear progress on elections in next year's first half supports the macroeconomic outlook and will affect sentiment and Thai assets positively, given current low expectations," said Tim Leelahaphan, an economist at Standard Chartered Bank Thai. "This would in turn support inflows."
A similar pattern was seen in August 2016, when the constitutional referendum was conducted smoothly, Mr Tim said, as well as in late 2017, when a verdict against the previous government over the rice-pledging scheme did not lead to political turmoil.
"In both cases, sentiment and inflows received a boost," he said.
The anticipated bills on the election of MPs and the selection of senators got the green light amid heightened calls from politicians for the regime to lift or ease its ban on parties engaging in political activities, something the regime indicated could happen this month.
But while the law pertaining to the Senate took immediate effect, the MP election law will not go into affect until after an additional 90 days.
The SET index closed at 1,717.96, up 38.57 points or 2.3%, in heavy trade worth 79 billion baht.
Institutional investors were net buyers of 11.5 billion baht, with foreign investors purchasing a net 2 billion baht worth of shares.
On the other hand, retail investors were net sellers of 12.8 billion baht and brokerage firms sold a net 701.4 million baht.
Shares in the banking, energy, retail and aviation sectors rallied as a result of rising investor confidence, with PTT gaining 5.1%, followed by PTTEP (+5%), CPALL (+4.6%), BBL (+4%) and AOT (+3.6%).
Vajiralux Sanglerdsillapachai, head of research at Asia Wealth Securities, said the welcome news about the laws regarding election of MPs and senators drove investor confidence and attracted both foreign and domestic investors to the Thai bourse.
Large-cap stocks will become the target of foreign investors, she said, with consumption-related equities reaping the most benefit from year-end festivities, the upcoming general election and the royal coronation.
External factors, however, still remain as headwinds against investor sentiment, Ms Vajiralux said. These include the global trade war, US interest rate normalisation and weakness in emerging-market currencies.