Thailand’s SET Index tumbles amid political, economic uncertainty

MONDAY, JUNE 17, 2024

Stock brokers put free fall down to pending cases against Move Forward, Srettha, and Thaksin, though one blames strengthening greenback

It is widely believed that uncertainty related to Thai politics and the economy caused the Stock Exchange of Thailand (SET) Index to tumble to its lowest in 51 months on Monday.

Several brokerage firms said this when SET fell by 0.76% to 1,296.59 at closing on Monday, with total transactions coming in at over 40.64 billion baht.

Prakit Siriwattanaket, senior director at Merchant Partners Asset Management, said the index was being pressured by courts' consideration on four cases set to be conducted on Tuesday, namely:

  • On the potential dissolution of the Move Forward Party for allegedly attempting to overthrow the King as head of state
  • On PM Srettha Thavisin for appointing former lawyer Pichit Cheunban as PM’s Office Minister despite him being once jailed for contempt of court
  • On a lese majeste case against former premier Thaksin Shinawatra stemming from a 2015 interview in Seoul
  • On whether four articles of the organic law on the Senate election are constitutional

He said the case related to Srettha’s right to remain as premier and Move Forward’s potential dissolution has triggered concerns about political conflicts. The Thai stock market is also being pressured by Thailand’s lack of economic competitiveness, such as low production capacity.

Prakit said he expects the SET Index to continue fluctuating for the rest of this month due to foreign investors’ short stock selling before a new regulation preventing the dumping of stocks comes into effect on July 1.

The new rule will stipulate that short selling will only be allowed when the price of the stock is higher than in the previous trade.

Kitpon Praipaisarnkit, senior director and strategist at UOB KayHian Securities (Thailand), however, believes the slump in the SET Index is due to the strengthening of the US dollar, resulting in an impact on the price of risk assets.

He said that he does not believe the upcoming verdicts will affect the Thai stock market, because Thai politics will not change much. Instead, he said, Pheu Thai Party’s economic stimulus policies should go ahead as the minimum wage hike and digital wallet handout scheme will help stimulate the economy later this year.

Kitpon also expects foreign funds to return to the Thai stock market next year in response to the US Federal Reserve’s move to reduce its policy interest rate. He expects the Fed to cut its policy rate at least nine times, including once this year, and four times each during 2025 and 2026.

Meanwhile, the strategist said he expects the SET Index to move between 1,270 and 1,290 points in the short term. The index’s support level lies between 1,220 and 1,270, while its resistance is at 1,330, he said.

He said this was the best opportunity for investors to purchase cheap stocks such as food, beverage and retail that will benefit from economic recovery and the government’s stimulus measures.