Political uncertainty may drag SET index lower, say analysts

Political uncertainty is poised to weigh heavily on the Stock Exchange of Thailand (SET) throughout June, with three legal proceedings involving Prime Minister Srettha Thavisin, former premier Thaksin Shinawatra, and the opposition Move Forward Party (MFP) expected to push the index lower than anticipated, analysts report.

CGS International (Thailand), a subsidiary of China Galaxy Securities, revised its year-end SET index target to 1,480 points from an earlier forecast of 1,560 points. The firm cites political unrest, an economic slowdown, and increased foreign outflows as key risks, said Kasem Prunratanamala, head of Thailand research at CGSI.

“Three politically charged court cases recently emerged and could form an overhang for the next few months or even longer.”

Thaksin faces accusations of lese majeste and computer crimes, with the attorney-general planning to submit a petition to the court tomorrow. This situation underscores a rift within the ruling coalition, particularly between the Pheu Thai and Palang Pracharath parties, Kasem said.

“We believe there is a decent chance Srettha will be found guilty in the case where 40 caretaker senators have petitioned the Constitutional Court, seeking to dismiss him over the appointment of Pichit Chuenban, who previously served six months in jail, as a minister in the Prime Minister’s Office.”

The Constitutional Court has also accepted a petition from the Election Commission to disband the MFP for breaching the charter in efforts to amend the lese majeste law, according to an article in Time magazine.

Stock market

The brokerage expects the MFP to be disbanded based on this case, Kasem added.

“We believe the mounting political uncertainty will dampen the economy as well as market sentiment. Downside risks could come from political unrest, a further slowdown in the economy, and more foreign outflows.”

KGI Securities (Thailand) noted that despite positive global factors in May, the Thai stock market experienced high volatility before closing barely changed from the previous month, with selling pressure intensifying in the latter half, said KGI Senior Vice-President Rakpong Chaisuparakul.

“In June, we expect the SET index to consolidate at a low level.”

In the near term, persistent negative factors, led by a political overhang, remain.

If PM Srettha and his Cabinet are found guilty in relation to the recent Cabinet reshuffle, it will necessitate forming a new Cabinet, which could delay stimulus measures, including the digital wallet, Rakpong explained.

Consequently, KGI has downgraded its 2024 SET index target to 1,491 points, reflecting a likely cut in the GDP forecast and the uncertain path of US interest rates, Rakpong noted.

Veeravat Virochpoka, head of research at FSS International Investment Advisory Securities, predicts that the legal case involving Srettha will take more than a month to finalise, based on a similar suit filed against former premier Prayut Chan-o-cha, reported Bangkok Post.

As a result, the SET index may trade within a range of 1,380 to 1,400 points at best this month, Veeravat concluded.