Thai stock market fails to rally


The SET Index (Stock Exchange of Thailand) has barely moved despite predictions by analysts that if Srettha became prime minister and the Pheu Thai Party led the formation of the government, the Thai stock market would experience a rally in the short term.

According to Tisco Securities’ CEO Paiboon Nalinthrangkurn, the main reason the Thai stock market has not responded positively to the new government formation is due to the fragile state of the Thai economy. The economy grew by just 1.8% in the second quarter, down from 2.6% in the first quarter. This slowdown is compounded by concerns that the government's economic stimulus policies may not be hitting their targets, as they have primarily focused on consumption, while the troubled sectors are exports, investments, and agriculture.

While economists have no doubts that the 10,000 baht digital wallet handout policy will stimulate the Thai economy immediately by injecting a substantial 560 billion Baht, or 3% of the Gross Domestic Product (GDP) within 6 months, investors are concerned that this could lead the government to cut budgets for other essential areas and create short-term economic stimulation with potential long-term consequences.

Another reason for the Thai stock market's lacklustre performance may be the global investment climate, which is not particularly favourable at the moment. Rising oil prices have led to concerns that global inflation may again climb, potentially pressuring central banks to raise interest rates further. However, this could be a temporary risk, and interest rate hikes in the United States may have already concluded, Paiboon said.

Looking ahead, the Tisco Securities CEO has a more positive outlook and believes that the Thai stock market is in the process of building a foundation for a new upward trend due to the following factors:

- Next year, the US Federal Reserve is expected to start a gradual interest rate hike cycle, which may not be significant but could signal the beginning of a global stock market uptrend.

- The risk of an economic downturn in the US is diminishing as the labour market remains strong. In the worst-case scenario, if the US economy were to slow down, lower interest rates could cushion the impact and prevent a severe downturn.

- China's economy is showing gradual signs of improvement, especially in retail sales and the expansion of its industrial and service sectors. The relaxation of monetary policies, fiscal stimuli, and easing property investment measures in China are likely to boost its economy and have positive effects on the Thai stock market.

- Thailand's economy has the potential to grow by more than 5% next year, a level not seen in 12 years, provided the government can successfully implement its economic stimulus measures as planned. This could attract foreign long-term investment back to the market.

- Corporate earnings of registered Thai companies are expected to grow by 15% next year, compared to a minus 1% growth this year, and could rise higher if the economic stimulus measures prove more effective than expected.

Taking account of these factors, the Tisco Securities CEO believes that the Thai stock market has the opportunity to outperform global markets in the near future after underperforming for much of this year. Historically, markets that underperformed in the previous year often rebound the following year.

What concerns Paiboon more is the sustainability of the market's recovery. Populist policies alone cannot sustainably boost stock prices because they are short-term measures, he points out.

Over the past decade, the Thai stock market has become a 'trading market', characterised by volatile movements without significant upward trends. To attract long-term foreign fund inflows, the government needs to address Thailand's structural economic problems and create confidence that the Thai economy can grow at a 4-5% annual rate in the long term.

The Tisco Securities CEO believes that the government understands these structural issues, as they are largely outlined in its policy statement. However, whether the government is committed to addressing these problems is open to question, as many issues require continuous solutions, take time, involve vested interests, and may not yield results within the government's term in office.