Global funds pare back Thai stocks and bonds ahead of Feb 8 vote, despite cheaper valuations

Global fund managers are dialling down risk in Thai equities and government bonds ahead of Thailand’s February 8 election, as international investors position for greater clarity on the country’s economic policy direction after the vote.

Bloomberg reported that a number of global asset managers have already limited exposure, even though Thai share valuations look comparatively cheaper, with the market trading at about 14 times earnings (P/E)—below its five-year average and lower than some regional peers.

Election seen as a key test for market confidence

Christopher Liew, chief investment officer at Principal Asset Management in Singapore, was cited as saying that while Thai shares may look “cheap” relative to earnings, valuation alone is not enough to attract fresh inflows.

Bloomberg noted that investors are watching for signs that the next government—expected to produce Thailand’s fourth prime minister in three years—can deliver more consistent economic management and structural reforms.

How major investors are positioning

According to Bloomberg, T. Rowe Price Group Inc. has taken a cautious stance by reducing holdings of Thai bonds ahead of the election, while remaining wary about baht-denominated debt and waiting for clearer signals on the next government’s policy direction before adding exposure.

Allianz Global Investors has also kept an underweight view on Thai bonds, but has started to see opportunity in interest-rate spreads, preparing to shift into longer-dated bonds on expectations that prices have already reflected much of the risk and could benefit if policy rates fall in future.

Meanwhile, BlackRock Inc. has reduced overall bond exposure but has been returning to buy longer-maturity Thai bonds, citing the view that the sharp fall in prices has already priced in concerns about government spending.

Aberdeen: focus on exporters, avoid domestic-dependent names

Bloomberg reported that Aberdeen views Thai politics as a continuing risk factor—particularly if the election produces a multi-party coalition that could complicate decision-making and policy continuity. As a result, the firm has favoured avoiding stocks that rely directly on the Thai economy, focusing instead on export-oriented names that earn primarily from overseas markets, and on defence-related or more resilient sectors that can withstand economic shocks.

Natthanon Aranyakanon, an investment manager at Aberdeen, was quoted as saying the election is “only the beginning”, and that longer-term confidence will depend on whether the new government can deliver genuine economic reform—supported by tangible monetary and fiscal policy—and improve productivity and the overall investment climate. Without that, any post-election rally risks being short-lived, he said.

“Election rally” pattern, but bond volatility in focus

Bloomberg noted that historically the SET Index has tended to rise in the month after an election by an average of about 2.2% to 3.3%, helped by greater clarity and speculation in sectors expected to benefit from populist measures, such as retail and hire-purchase stocks.

On the bond side, Bloomberg has also reported that Thailand’s long-dated bond outlook has been pressured by concerns about heavier debt issuance to fund stimulus, with the spread between two-year and 10-year yields widening to its highest level since November 2023.