The main share index yesterday jumped almost 2 per cent on investors' hopes that the Constitutional Court's ruling yesterday to nullify the controversial April 2 general election would be a breakthrough for the political situation.

The Stock Exchange of Thailand (SET)  index started the day with strong gains on speculations the court would rule to nullify the election. In the afternoon, after it officially declared the nullification and ordered a new election, the market continued to rise, closing at a high for the day of 782.91.

Turnover, however, was moderate at Bt20.55 billion and foreign investors turned back to be net buyers in Thai shares worth a total of Bt1.33 billion.

Big market capitalisation banking and communication stocks were the biggest gainers. Advanced Info Service Plc shot up almost 7 per cent to Bt99.50, Bangkok Bank jumped 3.57 per cent to Bt116, Siam Commercial Bank rose 4.72 per cent to Bt66.50, Kasikornbank surged 4.58 per cent to Bt68.50 and iTV Plc was up 4.47 per cent to Bt9.35.

Siam City Securities' deputy managing director Satit Wannasilpin said the court's finding would be a blessing for the Thai stock market, as it should ease the political conflict.

The court decided the April 2 date of the election was unconstitutional on two counts: first because it was called too quickly; and second that the arrangement of the polling booths compromised voter privacy.

Satit said, however, that he was concerned about the progress of economic

policy because political reform would be the main issue for the incoming government.

"I believe the Thai Rak Thai Party will win the majority vote in the next general election. However, the government will concentrate much more on political reform," he said.

Satit, who also serves as the director of the Association of Securities Analysts,

said several brokers in April cut their earnings per share (EPS) on Thai listed companies.

"Some brokers forecast a worst-case scenario for EPS growth of negative 8 per cent. In the best-case assumption, EPS would grow at about 5 to 7 per cent. The forecasts factored in the impact of the political crisis, high fuel prices, rising inflation and interest rate hikes, he said.

"The local economy is overshadowed by the oil price and the political issue.

The increase in Thai shares prices could be ascribed to driven liquidity. If the

SET index stays at 780 points or a price-to-equity ratio of 10 times, the stocks

are considered overvalued and this would cause high volatility in the stock market."

Asia Plus Securities Plc vice president Saengtham Jaranachaikul said that the continuing capital flow into Thailand and the sharp gains in the Asian stock markets buoyed by a strong rally on Wall Street on Friday also helped cheer up market sentiment.

Wall Street's blue-chip Dow Jones Industrial Average  hit a six-year high amid stock market hopes the US Federal Reserve could soon call off its campaign of interest rate hikes.

SET executive vice president Vichate Tantiwanich said the court's decision would have an impact on business, particularly companies that planned to expand investment, as it is not clear how much effort the new government will put into drive the country's economy.

"Businesses are likely to hold back on their investment decisions until they have had chance to digest the result of the next general election. Although the Thai Rak Thai Party is expected to win a majority, public scrutiny will be more intense," he said.

Vichate said Thai corporate earnings should be in good shape this year based on first-quarter performance, which was up on the corresponding period last year, despite the political uncertainty and record-high oil prices.

Siriporn Chanjindamanee

Oranan Paweewun

The Nation