Analysts Say Thai Market in Anxiety Attack and Likely to Remain Volatile Until New Gov’t Formed

The benchmark index in Thailand fell again on Friday amid widespread selling of large-cap stocks as investors waited for further clarification on the new government’s formation.

At the close of the morning session, the SET Index was down 6.06 points, or 0.40%, to 1,520.63, with a total trading value of THB24,183 million.

According to Krungsri Capital Securities, investors on the SET have been on a selling binge since May 10, causing the benchmark index to fall by 2.7 points. Market drivers include economic data both domestic and international and operation earnings have been depressing but mostly in line with forecasts. Therefore, concerns about the political situation in Thailand likely sparked the selling frenzy.

The SET Index is likely to remain volatile and may trade inside a depressed zone at 1476-1580 until there are definitive reports on the formation of the next government, Krungsri said in a note released on Friday.

The brokerage noted that historical data based on the “Thailand Political Risk Index” (a measure of the political climate in Thailand) showed that heightened political risks had led to stock market drops significantly in the past. The brokerage firm stated that it has a strong suspicion that risk has increased substantially since last week’s election, even if it may be up to 60 days before there is more clarity due to the lack of data. Krungsri is now focusing on 1975, a year in which the Democrat Party won the election but was unable to establish a government. At that time, the risk index had risen sharply and the SET Index had tumbled until parliament was dissolved in 1977. 

“The SET Index closed at 1570 before the election, which means it could drop to a low of 1480 based on latest developments in the political scene,” said analysts at Krungsri Capital.