Post-election selloff hits Thai bourse, triggered by political uncertainty

The post-election selloff in Thailand has been the steepest in two decades, triggered by uncertainty around political jostling and concerns over the formation of a coalition of pro-democracy parties to take government.

Move Forward, which won the most seats in the lower house parliamentary election, and its seven coalition partners are the closest to securing enough seats to elect Thailand’s next prime minister. But The timeline for government formation in Thailand has been pushed back to late July or early August, causing concern among investors.

Key Takeaways

• The post-election selloff in Thailand’s financial markets is the steepest in the past two decades due to concerns about political jostling.
• Foreign investors have been selling off Thai bonds and stocks, with outflows totalling more than $1.2 billion over the past five days.
• The uncertainty has triggered an outflow of funds and worsened the rout in Asia’s worst-performing stock market this year.
• The Move Forward party, which won the most seats in the lower house parliamentary election, has pledged to cut energy bills and raise wages, which has hit the industry outlook.

Investors may have to wait until August to find out whether a coalition of pro-democracy parties can take government, leading to continued withdrawals until there is clarity on the new leadership.

This has led to outflows of funds and worsened the performance of Thailand’s stock market this year, as well as a weaker baht against the dollar. While the coalition has formalized its alliance, investors may have to wait until August for clarity on the new leadership, leading to a bumpy ride for Thailand’s financial markets.

Potential political void

Although the coalition formalised its alliance on Monday and official economic data showed better-than-expected first-quarter growth, investors remain skeptical until there is clarity about the new leadership. Investors have been selling Thai stocks for 11 straight days, withdrawing 25 billion baht. The Election Commission has up to 60 days after the vote to release official results and certify 95% of the lower house seats.

Thailand’s private sector is concerned about political stability following Sunday’s elections, which resulted in a potential political void. Some businesses are hoping for the Move Forward Party to form a government quickly and ensure continuity of key economic projects, such as the Eastern Economic Corridor.

There are concerns that the party’s promises of raising the minimum wage and offering cash handouts could harm the economy. The Office of the National Economic and Social Development Council has warned that fiscal discipline is necessary in drafting any new budget, as rising wages could push up costs and adversely affect foreign direct investment.