Investors in Asia’s worst-performing market on edge after poll

A WEEK after Thailand’s pro-democracy parties garnered a historic win in national elections, investors are waiting to see if a planned coalition can get enough votes from lawmakers to form a government.

The uncertainty has triggered an outflow of funds since the May 14 poll, worsening the rout in Asia’s worst-performing stock market this year and sending the baht lower against the dollar. While the coalition plans to formalise its alliance on Monday (May 22), the selloff may continue until there’s clarity on the new leadership.

“Investors will wait for any further positive political development” before making any investment decisions, said Rakpong Chaisuparakul, an analyst at KGI Securities (Thailand) in Bangkok.

The Move Forward Party, which won the most seats in the election, aims to win parliamentary support for a coalition of more than 300 members with its leader Pita Limjaroenrat as prime minister. The alliance is still short of the 376 votes needed to form a government without counting on the support of the 250-member, military-appointed Senate that also gets to decide on the premiership.

Investors withdrew US$513 million from the nation’s bond market last week through Friday for the first weekly outflow in a month, and sold US$312 million of local equities, according to data compiled by Bloomberg. The benchmark SET Index tumbled 3 per cent to cap its biggest weekly slide in almost a year.

Election overhang

“The longer these negotiations drag on, the more uneasy investors become,” said Galvin Chia, a currency strategist at NatWest Markets in Singapore. “Forming a new government quickly will remove the overhanging electoral worries and is crucial to easing investor worry.”

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Should the coalition manage to form a government, the parties are expected to follow through with their promises of giving cash handouts, increasing the minimum wage and boosting the allowances for pensioners and the elderly. The Move Forward Party has also pledged to end business monopolies and promote more investment outside of Bangkok.

Still, Pita’s coalition may be at risk if conservative parties band together to secure the backing of the majority of the Senate. Such an outcome may spark a revival of protests from pro-democracy supporters after almost a decade of military-backed rule in Thailand. BLOOMBERG