SET index drops after MFP election win spooks investors

Image courtesy of Bangkok Post

Despite the Move Forward Party (MFP) election victory on Sunday, the Stock Exchange of Thailand (SET) experienced a downturn yesterday. Investors sold shares related to politics and large-cap stocks that could be negatively impacted by the MFP’s policies, according to analysts.

The SET index closed 1.28% lower yesterday, with shares of Gulf Energy Development Plc (GULF), Thailand’s largest power producer, among the top losers on the exchange. Other electricity producers, such as B.Grimm Power, Global Power Synergy (GPSC), and Ratch Group, also experienced losses.

Investors offloaded shares of Advanced Info Service (ADVANC), controlled by GULF through InTouch Holdings, and CP All, as well as politically-linked stocks like Sansiri Plc, SC Asset, and True Corp.

Koraphat Vorachet, head of Thailand Equity Strategy at Capital Nomura Securities, explained the psychological impact of the election results on the selling of big-cap stocks dominating each sector on the SET. He said…

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“The Move Forward Party has policies that focus on creating free competition in each business sector. That’s why we see investors selling the shares of companies that dominate sectors that they are in, such as retail, power generation, and telecom.”

Nattawat Onratn, senior executive vice president at CGS-CIMB Securities (Thailand), highlighted panic selling as the reason for the drop in shares of listed power producers, led by GULF, due to concerns about the Move Forward Party’s policies, which aim to lower the energy tariff. Shares of ADVANC, in the same group as GULF, also fell by approximately 5%.

Pichai Lertsupongkit, first vice president at Thanachart Securities, anticipated some resistance in the formation of the new government by the Move Forward Party following their surprising majority win in Sunday’s election. He said…

The Move Forward Party’s key policies are about the welfare state while the Pheu Thai Party is focused on liberal capitalism, but both have populist promises which can stimulate the economy in the short-term.”

Bualuang Securities stated that market volatility would continue until the formation of the government becomes clear. Stocks related to the Pheu Thai Party were sold after the party secured fewer-than-expected seats in the House of Representatives.

Asia Plus Securities (ASPS) predicted that the stock market should recover soon, based on the expectation that the new coalition government would be stable and implement its policies smoothly. ASPS said…

“A political shift is happening and the new coalition government is probably stable as the number of MPs of the potential coalition parties is significantly larger than the opposition parties.”

The Election Commission will take 60 days to investigate the poll results, with the first parliamentary session scheduled for the first half of July 2023. A new prime minister will then be appointed, and the new cabinet will be formed, likely to be royally endorsed and take office in August, reported Bangkok Post.

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