Thai investor confidence sinks as government formation uncertainty looms

Investor confidence in the nation’s stock market has dropped to an eight-month low due to uncertainty over the formation of a new government, according to the Federation of Thai Capital Market Organisations (Fetco). The overall investor confidence index has dipped to 77.70 from 110.09 in May, entering the “bearish zone” for the first time in eight months. Foreign investor confidence has also followed suit, with a net sale of 102.4 billion baht worth of Thai shares this year and 31 billion baht in May alone.

Before the election, in which the Move Forward and Pheu Thai parties secured a combined 292 seats, the Stock Exchange of Thailand (SET) index had continued to rise, defying global trends, as reported by Fetco. However, after the election, the SET index became the “worst performer among global markets due to concerns over the new government formation and its economic policies,” said Fetco chairman Kobsak Pootrakool in a statement.

The SET index has experienced an 8.6% decline so far this year, the most significant drop in Asia. Pita Limjaroenrat, the prime ministerial frontrunner from Move Forward, has formed a coalition with seven other parties but faces challenges in convincing members of the unelected Senate to support him in a vote for premier, anticipated to take place in early August.

Investors are currently scrutinising the economic policies of the election winners, including stimulus measures, wage increases, and tax plans, Kobsak added. “The slower it is formed, the higher the concern will be,” he said, referring to the formation of the next government.

Meanwhile, the Joint Standing Committee on Commerce, Industry and Banking has maintained its economic growth forecast for 2023 at between 3% and 3.5%. Although the tourism sector has shown improvement, exports continue to be sluggish. Exports are predicted to remain flat or decrease by 1% this year, while 30 million foreign tourists are expected, the committee stated. The economy experienced a 2.6% growth in 2022.

Despite the economy’s recovery trajectory, slowing global growth continues to impact exports, which have contracted for seven consecutive months, the group explained in a statement. “If exports don’t recover, other related industries will also be hit,” it said.

The business sector also expresses concerns about increasing interest rates and inflation, particularly if wages are raised in the future, the group noted. A hike in the daily minimum wage to 450 baht, as promised by the Move Forward Party, would cause inflation to rise by 0.82 percentage points, the group said. Presently, minimum wages vary from 328 to 354 baht a day depending on the province, reports Bangkok Post.