A man reads a Thai newspaper featuring front page coverage of Thailand’s general election at a newsstand in Bangkok on May 15, 2023. (Photo by Lillian SUWANRUMPHA / AFP) (Photo by LILLIAN SUWANRUMPHA/AFP via Getty Images)
Lillian Suwanrumpha | Afp | Getty Images
Thai stocks rose briefly while the Thai baht gave up early gains after momentarily touching a three-month high on Monday. Investors are awaiting more tangible outcomes of Sunday’s general election, after preliminary results showed the country’s pro-democracy parties secured a strong majority.
It remains to be seen which parties will eventually form the new Thai government as a coalition is needed since both opposition parties don’t have enough votes to form a new government.
A calculation by Reuters based on data from the country’ Election Commission suggests the anti-military Move Forward party, led by Thai businessman Pita Limjaroenrat, would win the most seats, followed by the Pheu Thai party.
If confirmed, this would represent a resounding rejection of pro-military parties led by former prime minister Prayut Chan-o-cha, ending nine years of pro-military rule.
Official certification of the results are expected to be finalized within 60 days after the polls close.
The Set Composite Index briefly traded 0.3% higher at the open on Monday before paring gains and was 0.83% lower in the afternoon.
The Thai baht strengthened 0.6% on Monday to 33.73 against the U.S. dollar, its strongest level since February earlier this year.
Analysts expect the Thai markets to be initially cautious as the results are finalized and certified.
Speaking to CNBC’s “Street Signs Asia,” Dan Fineman, co-head of APAC equity strategy at Credit Suisse said there is a “good trading opportunity” for the Thai markets post election. He noted that historically, the market has underperformed before elections, but outperformed following the elections after a stable government is formed.
“We have to bear in mind that there have been a lot of tricky business in Thai politics over the years,” Thitinan Pongsudhirak, professor of politics and international relations at Chulalongkorn University, pointed out.
“The largest winning party should be able to form the government, but that’s not the case. There are three steps to it: Winning the elections is one thing, forming the government is the second proposition and the biggest challenge to get you on Prime Minister,” he told CNBC’s Sri Jegarajah in Bangkok.
The Pheu Thai party has put forward Paetongtarn Shinawatra — the daughter of former Thai prime minister Thaksin Shinawatra — as its candidate for prime minister, while Reuters reported that Limjaroenrat also has “set his sights set on being prime minister.”
Markets to remain cautious
In terms of market sentiment, Fineman said he believes a stable government will be formed, and the markets will see the “post-election bounce.” But till then, he said the Thai market will be “treading water” for the next several weeks.
Fineman pointed out that the opposition parties may have won a clear majority in the lower house, but they need the support of senators in the upper house, “and there are lingering concerns that we would potentially have a hung parliament.”
Thailand’s house of representatives have 500 seats and are directly elected, but Thailand’s 250 senators were appointed by the military junta four years ago, and a party has to secure a majority of the 750 seats to form the government.
Given that the election commission has 60 days to finalize the election results, the Thai markets “may not move that much,” said CGS-CIMB’s head of Thailand research Kasem Prunratanamala.
What next?
Prunratanamala told CNBC that if the election commission takes measures like disbanding opposition parties, this could trigger a negative market reaction. “They can foresee that that kind of move will probably cause people to come out on the street to protest.”
Another concern for the market is that if the leading Move Forward party can form the government, what will be the impact of their policies that they promised on the campaign trail?
“For example, they mentioned that they’re going to cut the electricity tariffs. So that [could] hit the utility sector,” Prunratanamala added.
Pongsudhirak from Chulalongkorn University agreed there could be unrest “if there’s a systematic subversion, distortion or manipulation of the results we saw yesterday” — since Sunday’s elections were “a profound, earth-shaking result for Thai politics over the last two decades.”
“We have been stuck with this Thaksin, anti-Thaksin cycle,” the professor said. “Now, with the Move Forward Party’s victory yesterday, the Thai people have spoken up for change and reform.”
He pointed out that the Move Forward party is “unlike the Thaksin party.”
“First of all, it is not aligned to Thaksin — it has a very different agenda, it is not a populist party per se. It wants institutional reforms of Thailand’s traditional institutions, the military, the monarchy and the judiciary – the root causes of Thailand’s crisis the last two decades.”
Pongsudjirak said he expects a more market-based, progressive economic policy management from any Move Forward-led government, that is pro-foreign investment, anti-monopoly, with more competition being enforced and small- to medium-sized companies “getting a better share of the deal.”
First quarter GDP
Separately, Thailand’s gross domestic product for the first quarter grew 2.7%% year-on-year, beating expectations of a 2.3% rise.
Ahead of the election’s results, Citi economist Nalin Chutchotitham wrote in a Sunday note that Thailand’s economic outlook is likely to be little changed in the following months.
“We expect Q1 GDP growth to remain tepid, but sufficient to signal that the economy bottomed out in Q4 2022, which would support the BOT [Bank of Thailand]’s rate hike,” she said.
Thailand’s central bank’s policy currently stands at 1.75%, and will next meet on May 31. Citi expects the Bank of Thailand to raise its benchmark interest rate by another 25 basis points.
Chutchotitham also expects the new government to be confirmed in August and the economy’s full-year 2023 fiscal budget slated to be announced sometime in the final quarter of the year.
“Over the medium-term, economic outlook could see increased risks of populist economic policies which could raise questions on future fiscal discipline,” she wrote.
— CNBC’s Jihye Lee contributed to this report.