Nearly two months after the general elections, the Thai parliament began the process of voting a new prime minister on Thursday, with the first round result showing that Move Forward leader Pita Limjaroenrat failed to secure the required support of more than half of the bicameral parliament.
According to the 2007 constitutions, to become a new prime minister, a candidate needs 376 votes – more than half of the legislature, including the 250 military-appointed members of the Senate.
Pita, whose party won 151 seats and approximately 14 million popular votes, failed in his initial bid to become the next prime minister of Thailand on Thursday, despite receiving 311 votes from an eight-party coalition and 13 votes from senators.
Pita was unable to win support from a majority of lawmakers in the bicameral parliament, given that many of them either didn’t vote or voted against him.
Next week, the Thai parliament is expected to hold another vote, which Pita can contest if he is renominated.
Following the results, CGS-CIMB Securities published on Friday its projections for the Thai stock market and another round of prime minister elections, expecting the market would remain volatile over the next few weeks as voting for a new prime minister continues, making this a good buying opportunity, but also warning of downside risks from greater political unrest that could spiral out of control.
The brokerage firm now expects Pheu Thai to establish the new government because Pita will not get enough votes in the second and third rounds. This allows Pheu Thai, which won 141 seats, to nominate a prime minister in the fourth round. Pheu Thai and MFP could work together, but the brokerage still thinks they will not earn enough votes.
Pheu Thai may establish a new government with Palang Pracharat (PPRP), Bhum Jai Thai (BJT), and Democrat in a fifth round of voting. With this picture, CGS-CIMB thinks the new coalition will get enough senators to establish a new government.
Should Pheu Thai be able to form a government, CGS-CIMB anticipates an upsurge in sectors such as banking, consumer goods, retail, travel, and real estate, while defensive sectors such as healthcare and telecommunications are anticipated to underperform.
In addition, if the MFP fails to form the new government, large-cap companies dominating a few sectors that had been sold off due to concerns over policies to dismantle monopolistic industries should it come to power could come back.
The top-recommended stocks are AP, BBL, BH, CK, CPALL, CRC, ERW, HANA, ICHI, MINT, PR9, ORI, SCB, and WHA.
Similar to CGS-CIMB, Credit Suisse anticipates that other prime minister candidates and coalition permutations will be voted on if Pita and his progressive party Move Forward are unable to secure sufficient support in the next two voting rounds. A moderately stable government will be constituted within the next two to three weeks.
The Swiss bank foresees three potential outcomes: 1) The current eight-party coalition remains in place but selects the Pheu Thai Party’s candidate, Srettha Thavisin, as prime minister. 2) Pheu Thai could replace the MFP with Bhumjai Thai, the third-largest party in the May election, and other smaller parties. 3) Pheu Thai could replace the MFP with Palang Pracharat, the leader of the prior government, and other smaller parties.
As for the stock market, Credit Suisse anticipates that the SET Index will remain weak until political uncertainty subsides, and once a new government is established, the bank anticipates that Thailand will outperform regional peers.
