DELAYS in endorsing a new prime minister in Thailand are expected to further dampen prospects of a revival in the nation’s initial share sales this year as foreign investors will continue to shun assets until there’s clarity on forming a new government.

Major Thai IPOs will continue to face some “difficulty” with weak demand from overseas investors amid rising interest rates and political uncertainty, said Manpong Senanarong, a senior executive vice-president at the Stock Exchange of Thailand. International investors still prefer to wait for a clearer view of the new government, its policies and improvement in global market sentiment before investing in Thai equities, he said.

International funds accelerated their selloff of Thai stocks after a May national election delivered a surprise win by the Move Forward Party. But the pro-democracy party’s leader, Pita Limjaroenrat, was blocked from being appointed prime minister in a parliamentary vote by military-appointment senators who oppose his policies. The coalition was disbanded on Wednesday (Aug 2), with second-place Pheu Thai pledging to form a government without Move Forward.

“Market sentiment is one of the key factors” for the success of any large IPOs, Manpong said in an interview. Companies and advisers will wait until an improvement in sentiment before they proceed with the share offering, he said.

Expectations of a post election rally on optimism of spending by a new government has faded as the parliamentary standoff continued. While local buying has helped the Stock Exchange of Thailand SET Index erase most losses since the poll, it remains among Asia’s worst performing equity gauges this year with a more than 6 per cent drop.

The Bank of Thailand on Wednesday raised its benchmark interest rate to the highest level in nine years. The key SET Index dropped 0.4 per cent, snapping a two-day gain, as international funds sold a net US$73 million of local equities, according to data compiled by Bloomberg.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

“Large IPOs will probably be delayed to next year if the market sentiment doesn’t get better,” said Win Udomrachtavanich, the chairman of Daol Securities (Thailand). “There will only be small IPOs” that depend solely on Thai investors, he said.

Foreign funds pulled US$1.47 billion from local equities since May 14 election through July, boosting the total selloff to US$3.47 billion for 2023, according to data compiled by Bloomberg.

Local companies raised about 19 billion baht from IPOs so far this year, versus 64 billion baht for the same period of 2022, according to data compiled by Bloomberg. Offering amounts exceeded 100 billion baht every year since 2017 through last year, according to the stock exchange’s data.

“It will still be a very tough situation for IPOs due to rising interest rate and lingering political uncertainty,” said Somsak Sirichainarumitr, the chief executive officer of Asset Pro Management, a boutique investment bank. “We are just pinning hopes for a revival next year.”

Some 19 companies have listed their stocks this year, with the highest IPO size valued at about 3 billion baht. In 2022, 42 companies sold shares for the first time, with three raising more than 10 billion baht.

SCG Chemicals, Big C Retail and CP Global Food Solution are among the large companies which have sought regulatory approvals for IPOs. Siam Cement, one of Thailand’s largest industrial groups, has yet to decide the timing of share sale by its unit SCG Chemicals, which was initially set for last year, according to chief executive officer Roongrote Rangsiyopash. BLOOMBERG