Thai stocks rebound as court ruling eases political uncertainty

The Thai stock market closed sharply higher on July 1 after the Constitutional Court ordered Prime Minister Paetongtarn Shinawatra to temporarily step aside. The market viewed the ruling as easing some political uncertainty, prompting a short-term rebound.

The SET Index jumped 20.45 points, or 1.88%, to close at 1,110.01 with a total trading value of 41.7 billion baht. Institutional investors were net buyers of 814.55 million baht, while brokerage accounts bought a net 771.52 million baht. Meanwhile, foreign investors sold a net 776.06 million baht, and retail investors were net sellers of 810 million baht.

The Constitutional Court’s 7-2 decision to suspend Paetongtarn came in response to a leaked audio clip of her conversation with Cambodian strongman Hun Sen. The court has requested further clarification from the Prime Minister within 15 days, and will continue deliberations over the next one to three months.

Weerawat Wirojphoka, Director of Securities Analysis at Finansia Syrus Securities, told Krungthep Turakij that the market reacted positively in the short term, but the overall outlook remains neutral. “Although the index gained significantly, we are still awaiting the final ruling. The acting Prime Minister can still perform duties, including pushing through the budget bill,” he said.

He added that as long as the ruling coalition remains united and MPs continue performing legislative functions, the government’s key policies can still move forward.

Weerawat also noted that it was better for the court to accept the case and suspend the PM than to reject it outright, which could have sparked stronger protests. While the ruling has calmed the situation for now, demonstrations are still expected to continue at a lower intensity.

He warned that despite the rebound, the index may not have much room to rise unless it breaks above the 1,120-point level. “Political developments remain a major source of uncertainty. Investors should be selective and adopt a trading strategy for the time being,” he said.

Vathan Jitsomnuk, Director of Strategy Analysis at Pi Securities, said that following the Constitutional Court’s ruling to temporarily suspend the Prime Minister from duties, the Thai stock market responded positively. He viewed this as a short-term recovery, potentially driven by expectations of possible changes on the horizon.

Previously, the Thai stock market had been weighed down by multiple negative factors, including the country’s sluggish economic growth of just 1–2%, the controversy surrounding the leaked audio clip, and the market’s generally pessimistic sentiment towards the political situation.

However, with news of the PM’s suspension, investors may now see a window of opportunity, fuelled by hopes of fresh developments that could follow a change in leadership. This situation is reminiscent of former Prime Minister Prayut Chan-o-cha’s brief suspension from duty, after which he returned to work as usual. The market is now closely watching to see whether the court’s final decision will lead to Paetongtarn’s reinstatement or a leadership change.

As for investment strategy, Vathun recommends gradually accumulating Thai stocks, particularly when the index is in the 1,050–1,060 range. One key reason is that Thai equities are currently attractively valued. The market’s price-to-book (P/B) ratio now stands at around 1.0x—a historically significant level where recoveries have often occurred. In fact, the Thai stock market has only traded at this level twice before: during the 1997 Tom Yum Kung financial crisis and the 2008 subprime crisis. This makes the current valuation an appealing entry point for long-term accumulation.

Gun Hathaisattha, Chief Investment Strategist and Economist at the Research Division of CGS-International Securities (Thailand), provided further insight into the Constitutional Court’s 7:2 decision regarding the Prime Minister’s position in connection with the leaked audio clip. The ruling effectively orders a temporary suspension from duty while awaiting a final verdict, which is expected to take around 1–3 months.

However, the court’s acceptance of the case and its decision to suspend the Prime Minister temporarily was largely anticipated by the market. The Thai stock market had already reacted to the political tension, with a decline seen last Friday amid concerns over possible protests and the court proceedings.

In terms of investment strategy, Gun suggested continuing to focus on commodity-related stocks, particularly oil stocks like PTTEP. Any price correction in this sector should be seen as a good buying opportunity. Similarly, the recent dip in banking stocks presents a favourable entry point, with KTB being particularly attractive.

He also sees the telecommunications sector as a good opportunity for accumulation. Based on recent auction activity, competition appears to have been relatively mild. Among these, ADVANC stands out as a promising stock worth monitoring closely.