The continued uncertainty about the formation of the new government has pushed foreign investors to continue to sell down equities and bonds Thai markets
Foreign investors, a cornerstone for stability in the highly liquid and retail market driven Stock Exchange of Thailand (SET), have been selling down Thai equities since the preliminary results of the elections were announced in the wee hours of May 15th 2023.
Thailand held its general elections on May 14th that has left the country with a hung parliament with the left wing – Move Forward party, managing to get 151 seats in the 500 seat lower house of the parliament while center-left – Pheu Thai party, managed to get 141 seats.
These 2 parties have formed an alliance with 6 other parties to garner a total of 312 seats but the 2016 constitution that was passed a referendum on August 7, 2016, requires the votes of 376 votes in the joint sitting of the upper house (Senate comprising of 250 seats) and the lower house (comprising of 500 seats) of the parliament.
Only a handful of the 250 seats in the senate have so far committed to supporting Move Forward party’s candidate – Pita Limjaorenrat, as the country’s 30th Prime Minister. Less then 2 dozen have expressed their support while there is a need for as many as 60+ Senators to give Pita an opportunity to form the next government.
This coupled with the possibility of Pita being disqualified (click on link to read) from holding political office has spooked investors who have opted to remain sidelined or selling down their Thai holdings.
So far foreign investors have been net sellers of more than 32 billion Baht on the Thai stock market since the results of elections were released.
The situation was no different on the bond market either with foreign investors being net sellers of more than US$ 1.1 billion since the election day.
Analysts have said that the reason for the selling is the continued uncertainty in the policies that would be implemented.
Move Forward party has come out to openly state its intentions of breaking up monopolistic way of business that takes place in Thailand, it has also said that it wants to collect more taxes on things such as property, tax capital gains on the capital markets (apart from the transaction taxes that are already been paid).
The uncertainty was one of the reasons cited by Kasikorn Research, a unit of Kasikorn Bank Pcl, that came out to say that the gross domestic product (GDP) will likely hit a slowdown this year if the formation of the government is not put in place early.
Kasikorn Research came out to say that the uncertainty of the formation of the government has had an impact on the investor’s sentiments.
Nattaporn Triratanasirikul, deputy MD at K-Research, came out to say that the tourism sector is likely to help the growth of the GDP to 3.7% for the year 2023 but warned that the uncertainty could drag down the economic growth.
This uncertainty would lead the country to see stalled investments and those looking to invest would adopt a wait & see approach.