THE STOCK market is expected to respond positively after the general election, if a new government can be formed instantly without conflict, analysts in the Krungthep Turakij News Room daily TV programme said last week.
However, long-term pressure will still be weighing down the bourse with global economic slowdown and a likely decline in the growth of Thai listed companies' earnings, they added.
Pattera Dilokrungthirapop, chief executive officer of DBS Vickers Securities (Thailand), said the poll results will influence decisions on Thai stock investment, particularly for foreign investors, adding that several global funds have a policy to only invest in countries with an elected government.
On Friday, the SET Index rose 0.75 per cent or 12.29 points to 1,646.29, ending the past week with a daily turnover of Bt46.486 billion, with external factors replacing the general election as the main consideration of stock investors.
The SET Index is expected to advance after the election on two issues: market price to earnings ratio (P/E ratio) and Thai listed companies’ earnings.
The Thai stock market’s P/E ratio has remained at 14.8 times, thanks to listed companies’ sound fundamentals and financial stability, though it has not risen due to companies’ low profit growth, Pattera said.
DBS Vickers Securities (Thailand) has forecast its profit growth at 8 per cent this year and 6 per cent for next year.
“Growth is expected in companies’ profits this year, but will still be lagging behind their peers in other countries. Risks and negative factors have driven out foreign capital as the Thai stock market awaits the new administration’s policies,” Pattera said.
Montree Sornpaisarn, chief executive officer of Maybank Kim Eng Securities (Thailand), said regardless of which party leads the new government, its economic policies should not go against the principles of economics as Thailand has learned a lesson from price mechanisms, such as price guarantees for agricultural products.
The wage policy will also have an impact on the Thai bourse, he said, pointing to the financial difficulties small businesses will face from an increase in labour cost.
However, he said, he does not see much impact from populist policies, though warned that the proposal to impose tax on capital gains from stock trading calls for prudence. He also said that he agrees with the government's promotion of long-term equity funds as a means to generate savings for retirement through investment.
“Investors expect the stock market to warm up with the election results. In previous elections, the index rose, no matter which side won. It does not follow an ideal, but requires certainty,” he added.
Pornthep Jubandhu, senior vice president of SCB Securities, predicted a market rise in the week after the elections, since the majority will have voted in the winning party. However, the index may fall over policy issues.
There is not much difference in the policies of competing parties and the private sector seems to have accepted the proposal to increase the daily minimum wage from Bt300 to about Bt400.
However, this may force some business to shut down, he said.
Kavee Chukitkasem, deputy managing director of Kasikorn Securities, said if a government is formed immediately after the elections, the stock market could rise for a month with expected returns of 4 per cent as foreign investors have been waiting for a clear outcome and a smooth government transition.
He believes foreign investors will become more interested in Thai stocks, especially in banking, financing, property, retail, medical institutions and advertising.
However, the SET Index may fall by 4 per cent and go on a downward slope for up to six months if a new government is not formed immediately and if there is unrest. In this case, investors may opt for safe options with recurring income such as power plants, communication and property funds, he said.
The global economic slowdown and low earnings of listed companies have dampened investment sentiment this year, he said.