Analysts foresee positive market responses to a likely Pheu Thai win
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BASED on historical market reactions to past general elections, CGS-CIMB and Maybank Securities expect Thailand’s upcoming May 14 election to provide an uplift to the overall stock market.
For CGS-CIMB, this sentiment is premised on a Pheu Thai Party win – which the research house believes is likely based on recent opinion polls.
It also foresees Pheu Thai teaming up with Palang Pracharat Party to garner support from senators, and secure at least 376 out of 750 votes in the Senate in the process.
“If this is the case, we expect the market to respond positively. When Yingluck won a landslide victory in the 2011 general election, the market went up by about 10 per cent in the month after the election,” noted CGS-CIMB analyst Kasem Prunratanamala last Friday (Mar 24).
Major sectors that performed well on Thailand’s SET index after the 2011 general election included commerce, ICT (information and communication technologies), property, media, transport and banks, noted Prunratanamala.
“We believe the current market weakness is a buying opportunity, as the Thai economy is likely to accelerate on the back of more tourist arrivals, and the stronger economic momentum should bode well for Thai banks.”
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CGS-CIMB maintains its SET index target of 1,830 by end-2023, based on a 12-month forward price-to-earnings multiple of 17.5 times, which is about one standard deviation below the index’s five-year mean.
In view of a likely Pheu Thai win, the research house’s top “add” picks include construction engineering company CH Karnchang for its attractive valuation, conservative loan portfolio and expectations of outperforming its peers with stronger net profit growth in FY2023.
Despite projections of soft Q1 FY2023 results for CP All, Prunratanamala said the current weakness in the share price of the convenience store company presents a buying opportunity, ahead of an anticipated reduction in food costs as well as strong tourist arrivals.
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Thai conglomerate Minor International is also viewed as a potential share price beneficiary from a new Pheu Thai government. This is in anticipation of a “resounding recovery” in Thailand’s tourism sector along with an improving economic outlook in Europe, where some of the group’s hotels are located, said the analyst.
Likewise, Maybank Securities notes that past election cycles have generally been positive for Thailand’s stock market, with investor sentiment buoyed by expectations of economic stimulus measures to support the country’s economy.
The research house notes that over the past five elections since 2001, the SET index rose by an average of 3.4 per cent three months before the election, and another average of 5.4 per cent one month after.
On the assumption that there will be “minimal disruption” to tourism-led recovery in Thailand, Maybank is forecasting the country’s GDP (gross domestic product) growth to come in at 4 per cent in 2023.
“Our base case is for a political transition which may delay budget approvals and government spending, but has minimal impact on the return of foreign tourists,” said the analysts in a Mar 24 report.
Highlighting how the new electoral rules in Thailand favour large political parties such as Pheu Thai, Maybank said opposition parties would have to win by a landside to replace the military government.
The research house also believes that whatever the outcome of the May 14 general election, Thailand’s new administration is set to inherit both medium- and long-term challenges such as high household debt and ageing demographics.
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