What Analysts Say About Baht, Stocks as Uncertainty Grips Race to Pick Thailand PM

Ian Sayson and Anuchit Nguyen
·4 min read

(Bloomberg) -- Thai equities were volatile after capping their longest rally since the start of the year as investors weighed if a new government can emerge without triggering violent protests after a popular leader’s premiership bid was blocked.

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Parliament yesterday barred the leader of the party that won most votes in the May general election — Pita Limjaroenrat — from his premiership bid, prompting expectations that the second-largest party, Pheu Thai, will nominate its candidate when lawmakers next meet.

“We have to closely watch protests, especially if the demonstrations turn violent,” said Adisak Phupiphathirungul, an analyst at Thanachart Securities. “This will have a negative sentiment toward tourism and commerce sectors.”

Thailand’s SET Index, Asia’s worst performing benchmark this year, ended 1% lower on Thursday, reversing earlier gains of as much as 0.3%. The baht added as much as 1.1% to 33.753 against the dollar before paring. The currency rallied for a fourth day, making it the best performer in the region this week.

Pita’s Move Forward party swept the May election with its pledge to break monopolies, reduce power costs and raise wages. Its promise to amend a law that punishes criticism of the monarchy drew harsh criticism from other lawmakers, mostly senators, who blocked his prime ministerial bid in parliament.

Still, protests by supporters of Move Forward risk a repeat of violent clashes that erupted after the leader of its predecessor party was disqualified as a lawmaker in similar circumstances to the latest developments engulfing Pita.

Here’s what analysts are saying:

Waritthorn Kaewmuang, analyst, UOB Kay Hian Securities

  • “Expect the market to focus on the coalition led by Pheu Thai, which is facing a significant number of challenges, and whether Move Forward Party will be pushed toward the opposition or not”

  • Recommends buying stocks that were sold after the election results; sees utilities and construction services stocks benefiting, especially CH. Karnchang and Sino-Thai Engineering

  • “We expect investors to look forward to the certainty of the new government and the absence of the impact arising from the shift in political spectrum”

  • “The protest yesterday was moderate in size and without violence. We don’t expect any shift in political landscape arising from yesterday’s protest and extremely minimal impact to the stock market, except tourism names in the short term”

Jeffrey Zhang, emerging market strategist, Credit Agricole CIB

  • “We remain wary of the rising volatility of THB before dust settle over the PM vote, and see room for THB to correct if there is a prolonged period of government forming along with potential more political disputes,” Zhang wrote in a note.

  • “We attribute the recent strengths of the THB since July to the continued hawkish comments from BOT, short-covering amid recent USD weakening, and a rebound of global gold prices, while we don’t reckon the latest dynamics in economy growth and political development as strong tailwinds for currency fundamental”

Adisak Phupiphathirungul, analyst, Thanachart Securities

  • “Pheu Thai party will probably have an opportunity to lead the formation of new government and nominate the prime minister candidate.”

  • “Still, we have to closely watch protests, especially if the demonstrations turn violent. This will have a negative sentiment to tourism and commerce sectors”

Tim Leelahaphan, economist, Standard Chartered Bank

  • “Pheu Thai has emerged as a front-runner in forming a government, and all eyes are now on whether the party will remain an ally of the MFP or whether it will seek to form an alternative coalition by bringing in parties in the outgoing government and exclude the MFP.”

  • “There is not much chance of forming a new coalition government with the MFP because most senators have made it clear they will not support the party due to its stance on amending the lese majeste law.”

  • “We expect political noise to rise further even after PM selection concludes, as it remains to be seen how voters will perceive the selected PM”

  • “It may take a couple of months for the political noise to gradually decline.”

Therdsak Thaveeteeratham, analyst, Asia Plus Securities

  • “Thailand’s political situation is becoming clearer, so foreign fund inflow may return” as “a new government is expected to be formed and start working in August”

  • “Pheu Thai is projected to become a leader in government formation and nominate its candidates” and it “may either join with the eight-party coalition under the MOU or form a new coalition”

  • “In case Pheu Thai joins force with other parties, wins majority and forms a new government, SET Index may fluctuate at first and political movement outside the parliament must be watched closely”

  • Investors should “favor stocks with robust foreign net buying” such as Kasikorn Bank, Advanced Info, Siam Cement, PTT Exploration, and Sansiri

--With assistance from Hooyeon Kim.

(Updates with SET Index closing price and baht in fourth paragraph)

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