Thai assets face mixed outlook on early election: analysts
THAILAND’S early election is expected to bolster local shares, while the baht may see limited impact after a strong performance this year that’s been driven by macro issues, according to analysts.
Thai Prime Minister Anutin Charnvirakul dissolved parliament, teeing up an earlier vote after a key political party backing his minority government threatened to withdraw its support.
The Stock Exchange of Thailand Index has dropped 10 per cent this year, though it’s about 18 per cent higher than its June low. Foreigners have remained net sellers, offloading nearly US$3.3 billion so far.
Meanwhile, the baht has strengthened more than 8 per cent against the dollar, thanks to a weaker greenback.
The currency, Asia’s second-best performer, has also been buoyed by Thailand’s current account surplus and the baht’s close relationship to soaring gold prices.
Here’s what analysts and strategists had to say:
UOB Kay Hian, Kitpon Praipaisarnkit
“An optimal strategy is to buy domestic-oriented shares “three months before election day, and then take profit one month after.”
“Pre-election rally is likely to occur if there are no coups/protests.”
If the Bhumjaithai Party or the Pheu Thai Party lead the government with joint coalition, it will be positive for the Thai stock market, “as the core policies of both parties are generally supportive of the economy and capital market.”
Citigroup, Kaseedit Choonnawat
Dissolution of parliament and early election should “front-load policy clarity” with a new government formed by around March.
Expect a more constructive relationship between Anutin’s Bhumjaithai Party and the People’s Party.
Reiterates top buy recommendations for CP All, Minor International, Bangkok Dusit Medical Services, True Corp, Krung Thai Bank, Gulf Development and Central Pattana.
Malayan Banking Bhd, Alan Lau
“We do not notice any clear pattern regarding the baht’s performance during past elections. The currency can though have various factors driving it beyond just the government’s policies”
“Even so, this time around, we would pay quite some attention to the elections especially given the multitude of topics that currently cloud the country’s outlook include fiscal sustainability, ‘gray flows’ and monetary policy.”
“As of late, the baht has appreciated in line with other regional currencies given the softening greenback. However, we do take note that the currency is outperforming and do not rule out the possibility of seasonal tourism inflows supporting it (even if it may be lower than prior years). Momentum does look strong for the currency at this point.”
Bank of Singapore, Moh Siong Sim
While it’s possible an early election could ease political uncertainty, “the question remains to what extent early elections will produce better political and policy clarity.”
Neutral on the currency given the baht’s strength this year “has been perplexing, although some of it can be explained by higher gold prices, against a fundamental backdrop that points to currency weakness.”
Oversea-Chinese Banking Corp, Christopher Wong
The baht “seems to be more influenced by external factors,” particularly the softer US dollar following the FOMC meeting and firmer gold prices.
“As we approach the election campaign period, domestic factors may potentially start to play a larger role in driving the baht, depending on how the situation develops, which remains fluid.”
“Near term we see some USD/THB support at 31.60, which may hold up in the interim.” BLOOMBERG
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