Thai Shares Rise as Parliament Dissolution Triggers Election Mode
SET Index gains 0.37% in morning trade as political uncertainty prompts analysts to predict short-term volatility and recommend dividend stocks
- The Stock Exchange of Thailand (SET) Index rose by 0.37% in morning trade immediately following the prime minister's dissolution of parliament.
- Analysts attribute the rise to the country entering "election mode," which is viewed as providing modest, short-term support for equities by accelerating the timeline for a new government.
- Despite the initial gains, historical data indicates this optimism is short-lived, with the market typically declining within a week and falling significantly after a month following a dissolution.
- Amid the expected short-term volatility, investment strategists are advising investors to accumulate high-dividend stocks during price corrections.
SET Index gains 0.37% in morning trade as political uncertainty prompts analysts to predict short-term volatility and recommend dividend stocks.
Thai shares opened higher on Friday morning following Prime Minister Anutin Charnvirakul's dramatic dissolution of parliament, as the country prepares for fresh general elections within the next two months.
The Stock Exchange of Thailand (SET) Index rose 4.60 points at the opening bell, trading at 1,258.14 points by 10:10 local time, representing a 0.37% gain.
The positive opening came despite political turbulence that has created what analysts describe as a "political vacuum" in the short term.
InnovestX Securities predicted sideways to upward movement for the market, noting that shares in Delta Electronics remain a key driver of short-term market direction.
The brokerage firm said the shift into "election mode" could provide modest support for equities in the immediate term.
The dissolution followed a contentious parliamentary vote on Wednesday over constitutional amendment procedures.
The Bhumjaithai Party broke ranks with its coalition partners by voting to maintain the Senate's veto power over constitutional changes, causing the motion to fail 310-290.
This breach of the memorandum of agreement with the People's Party prompted Anutin to dissolve parliament before facing a no-confidence debate.
Historical Patterns Suggest Volatility Ahead
Analysis of five previous parliamentary dissolutions over the past two decades reveals a consistent pattern of short-term market turbulence.
Gun Hathaisattha, chief investment strategist at CGS-CIMB Securities (Thailand), told Krungthep Turakij that shares typically gain an average of 0.9% on the first day following dissolution, as markets view elections positively.
However, this optimism fades rapidly, with the index returning to previous levels after one week (down 0.4% on average) and falling significantly after one month (down 4.6% on average).
The average maximum drawdown during dissolution periods stands at 6.4%, according to Liberator Securities, which recommended investors wait for pullbacks to accumulate high-dividend stocks.
Policy Measures in Limbo
The political upheaval means several pending government initiatives—including the second phase of the "Khon La Khrueng" shopping subsidy scheme, the Tourism Income Support programme (TISA), and transportation fee reductions—will now be suspended or potentially scrapped entirely.
Elections must be held within 45-60 days under Thai law, placing the likely date in late January or early February 2025. The Election Commission has five days to announce the official schedule.
Technical Levels and Investment Strategy
From a technical perspective, InnovestX warned that the market should not breach support levels of 1,250-1,245 points. Resistance stands at 1,273-1,280 points, which must be cleared for a fresh upward move.
Liberator Securities forecast the SET would contract within a range of 1,230-1,270 points on Friday, advising investors to focus on accumulating high-dividend payers during price corrections.
Gun suggested that levels between 1,230-1,250 points would present attractive entry points, recommending large-cap value stocks including CPALL, PTT, GULF, and BDMS.
The brokerage also highlighted Bangkok Bank (BBL) with a strategic price target of 170 baht, citing its strong balance sheet, improving asset quality, and potential for increased dividend payouts.
The bank currently offers a dividend yield of approximately 5.4% whilst trading at just 0.53 times price-to-book value.
Political Complexity Adds Uncertainty
The speed of the dissolution is viewed as mildly positive by some analysts, as it accelerates the timeline for forming a new government rather than allowing a lame-duck administration to limp through several more months.
However, the political landscape remains complex, with tensions between the Pheu Thai and Bhumjaithai parties complicating coalition arithmetic.
The People's Party's refusal to work with either adds further uncertainty about potential government configurations following the election.
While markets initially welcomed the clarity provided by dissolution, investors face a period of heightened uncertainty until a new government emerges—a process that could extend well beyond the election date itself as parties negotiate coalition arrangements.
