A person reads a Thai newspaper that covers Thailand’s general election at a newsstand in Bangkok, May 15, 2023. (Photo by Lillian SUWANRUMPHA/AFP) (Photo by Lillian SUWANRUMPHA/AFP via Getty Images)
Lilian Suwanrumpha | AFP | Getty’s paintings
Thai stocks rose briefly, while the Thai baht gave up early gains after briefly hitting a three-month high on Monday. Investors are awaiting more tangible results from Sunday’s parliamentary elections, after preliminary results showed the country’s pro-democracy parties won a transparent majority.
It stays to be seen which parties will ultimately form Thailand’s recent government as a coalition is required as each opposition parties shouldn’t have enough votes to form a recent government.
Reuters Calculation based on data from the national electoral commission, it suggests that the anti-military Move Forward party, led by Thai businessman Pita Limjaroenrat, will win essentially the most seats, followed by the Pheu Thai party.
If confirmed, it will mark a firm rejection of the pro-military parties led by former Prime Minister Prayut Chan-o-cha, ending nine years of pro-military rule.
The official certification of the outcomes is predicted to be finalized inside 60 days of the closure of polling stations.
The Set Composite Index briefly traded 0.3% at its opening on Monday before falling 0.83% in the afternoon.
The Thai baht it strengthened on Monday by 0.6% to 33.73 against the US dollar, the very best level since February this 12 months.
Analysts expect Thai markets to be cautious initially as results are finalized and authorized.
Chatting with CNBC’s “Street Signs Asia”, Dan Fineman, co-head of equity strategy for the APAC region at Credit Suisse, said there can be a “good trading opportunity” in the Thai market after the election. He noted that historically the market performed worse before the elections, but after the elections, after the formation of a stable government, it performed higher.
“We’ve got to keep in mind that there have been many difficult issues in Thai politics through the years,” noted Thitinan Pongsudhirak, a professor of politics and diplomacy at Chulalongkorn University.
“The most important winning party should give you the chance to form a government, but it surely isn’t. There are three steps to this: winning the election is one thing, forming a government is the second proposition and the most important challenge to get to be prime minister,” said Sri Jegarajah of CNBC in Bangkok.
The Pheu Thai party has named Paetongtarn Shinawatra – the daughter of former Thai Prime Minister Thaksin Shinawatra – as its prime minister candidate, while Reuters reported that the Limjaroenrat has also “set itself the goal of being Prime Minister”.
The markets are cautious
As for market sentiment, Fineman said he believed a stable government could be formed and markets would see a “post-election rebound”. But until then, he said the Thai market could be “treading water” for the subsequent few weeks.
Fineman identified that opposition parties could have won a transparent majority in the lower house, but need the support of senators in the upper house, “and there are lingering fears that we could potentially have a hung parliament.”
Thailand’s House of Representatives has 500 seats and is directly elected, but Thailand’s 250 senators were appointed by the military junta 4 years ago and the party must win a majority of its 750 seats to form a government.
Provided that the election commission has 60 days to finalize the election results, Thai markets “may not move that much,” CGS-CIMB Thailand’s head of research, Kasem Prunratanamala, said.
What’s next?
Prunratanamala told CNBC that if the election commission takes steps, such as disbanding opposition parties, it could trigger a negative market response. “They will predict that this sort of movement is more likely to cause people to take to the streets to protest.”
One other problem for the market is that if the leading Move Forward party manages to form a government, what can be the impact of its promised policies on the campaign?
“For instance, they mentioned that they were going to lower electricity tariffs. So this [could] hit the utilities sector,” added Prunratanamala.
Pongsudhirak of Chulalongkorn University agreed that there could possibly be unrest “if there may be a scientific subversion, distortion or manipulation of the outcomes we saw yesterday” – as Sunday’s election was “a profound, shattering consequence for Thai politics over the past 20 years.”
“We’re stuck in this cycle of Thaksin, the anti-Thaksin,” said the professor. “Now, after yesterday’s victory of the Move Forward party, the Thai people have spoken for change and reform.”
He identified that the Move Forward party is “unlike the Thaksin party”.
“To begin with, it isn’t allied with Thaksin – it has a totally different agenda, it isn’t a populist party per se. He wants institutional reforms of Thailand’s traditional institutions, military, monarchy and judiciary – the foundation causes of Thailand’s crisis of the last 20 years.”
Pongsudjirak said he expects a more market-based, progressive management of economic policy from any government led by the Forward Movement, i.e. to participate in the deal.
Q1 GDP
Individually, Thailand’s first-quarter gross domestic product grew 2.7% year-on-year, beating expectations for a 2.3% increase.
Before the election results, Citi economist Nalin Chutchotitham wrote in a Sunday note that Thailand’s economic outlook is more likely to change little in the approaching months.
“We expect GDP growth in Q1 to stay weak but enough to signal that the economy has bottomed out in Q4 2022, which might support BOT [Bank of Thailand]rate hikes,” she said.
Thailand’s central bank policy is currently 1.75% and the subsequent meeting can be on May 31. Citi expects the Bank of Thailand to boost its benchmark rate of interest by one other 25 basis points.
Chutchotitham also expects the brand new government to be approved in August, with the economy’s fiscal budget for the total 12 months 2023 expected to be announced in the ultimate quarter of the 12 months.
“Within the medium term, the economic outlook may imply an increased risk of populist economic policies, which can raise questions on future fiscal discipline,” she wrote.
— Jihye Lee of CNBC contributed to this report.