Thailand’s SET Index has been underperforming regional stock markets ever since the election date in mid-May as the market dislikes uncertainties that are growing among Thai political games, while the U.S. Federal Reserve signalling for further rate hikes also posts negative sentiment to the market as well.
Thailand’s main bourse SET Index was -10.62% from year-to-date, and -4.48% from the election date on May 14, 2023. Meanwhile, Korea’s Kospi Index rose 13.60% YTD. Vietnam Index rose 13.01% YTD. China’s SSEC Composite Index gained 2.75% while Shenzhen Component Index was -1.47%. Additionally, FTSE Bursa Malaysia KLCI Index was -7.88%.
The upcoming nomination and appointment of Thailand’s next prime minister on July 13, 2023 will be crucial to the stock market as there are many scenarios for the outcome.
CLSA Securities (CLSA) expected Pita Limjaroenrat, the leader of Move Forward Party (MF), to face difficulties against senates as he needs 64 more votes to win the nomination for PM and CLSA believed that less than 20 senators will vote for him.
If Pita fails to get the majority, CLSA expects the runner up Phue Thai Party (PT) to nominate Srettha Thavisin, former CEO of Sansiri Public Company Limited, over the ousted Thaksin Shinawatra’s daughter Paetongtarn. CLSA believed Srettha will receive more votes from senators as he is more compromising than Pita.
Nevertheless, there could be a scenario that PT will leave MP and join the former government party Palang Pracharat Party (PPRP) and nominate Prawit Wongsuwan as prime minister for he should have a majority support from the senate that the military appointed before the last election.
CLSA noted that in the event that MF fails to form a coalition government, it could lead to a protest as the party does have the most votes among political parties (39%). However, CLSA believed any protest would be short-lived.
In addition, CLSA set its SET Index target at 1,650 and preferred consumer and domestic plays, namely; CPALL (TP 82 baht), CPAXTRA (TP 48 baht), HMPRO (TP 18 baht), BBL (TP 198 baht) and KTB (TP 24.50baht). Moreover, if MF fails to lead the government, CLSA expected GULF and PTTGC to bounce back after being pressured by MF’s political campaign on reducing electricity tariffs.
Tisco Securities (Tisco) also published its research on the trading strategy ahead of the nomination date, but with a negative outlook as the firm set its SET Index target at 1,496 points.
Tisco believed it is unlikely Pita will win the vote, at least at the first meeting. If the first nomination fails, it could turn to PT instead, and that will take weeks before the parliament is able to get a new PM. Tisco also added that PT has more options than MF as it has not ruled out joining PPRP, which will receive support from the upper house.
In case MF fails to lead the coalition government, Tisco expected some protests scattered across the country, but not at the scale seen in the past.
There are three trading strategies that Tisco recommended. First is the case of MF and Pita lead the government. Tisco expected the market to react positively, but the overall gain should be slightly. Stocks that are not directly affected by MF’s policies may rise higher, while those stand to be affected may weaken further. Tisco chose banking and tourism-related stocks, while noting that it may avoid the energy and petrochemical sectors.
Second is the case if MF fails as Tisco recommended to preserve more cash in the short term as it could take weeks to appoint someone else, possibly from PT or PPRP.
The third strategy is that if there is volatility and SET Index correct by more than 5%, Tisco recommended bottom-fishing for stocks, especially domestic plays such as banks and commerce.
In addition, Tisco noted that its long-only basket includes SCB, BBL, CPALL, ADVANC, AP, MINT, BDMS, OR, SISB and MENA.
