Bangkok: Thai stocks closed down 13.48 points at the end of the session after the Prime Minister was removed from office over the audio clip case.
According to Thai News Agency, the Thai stock index concluded the afternoon session at 1,236.61 points, marking a decline of 13.48 points or 1.08%. The index fluctuated between a high of 1,255.84 points and a low of 1,236.61 points, with a trading value reaching 52.475 billion baht.
Paiboon Nalinthrangkura, President of the Investment Analysts Association, commented on the situation following the Constitutional Court's decision to dismiss Ms. Paethongtarn Shinawatra from the Prime Minister position and the subsequent dismissal of all ministers. He noted that the market had anticipated this outcome, and thus, the stock market reaction was not surprising. Analysts are now focused on the timeline for appointing a new prime minister and establishing a new government, as the capital market is still allowing time. Predictions suggest the Pheu Thai Party will likely maintain its leadership, with a new prime minister from the same party, assuming coalition parties stay in power to manage the economy. The passing of the 2026 budget bill by parliament should not pose an obstacle even if government formation is delayed.
In the short term, the downside risks to the capital market are deemed minimal, while the upside depends on the swift establishment of a government. A potential political reshuffle could result in the dissolution of Parliament, possibly occurring as soon as late this year or early next year. However, compared to past events, such a scenario is not considered detrimental to the stock market, which often hopes for positive outcomes from elections.
The Thai stock index is projected to rise to 1,300 points if investor confidence returns. The current index level is believed to be underpinned by strong fundamentals, despite political transitions, barring unforeseen events.
Future developments will determine the government's stance and the continuity of existing policies, as the economy demands new investment. Last year, investment promotion applications through the Board of Investment (BOI) exceeded 1 trillion baht, with expectations to surpass the same amount this year. Clarity on US tax measures is anticipated to facilitate Foreign Direct Investment (FDI), providing economic momentum. However, the caretaker government's capacity to implement the 157 billion baht economic stimulus budget remains uncertain. Successful implementation could further boost the economy.
Mr. Apichat Phubanjerdkul from TISCO Securities stated that the Constitutional Court's decision was anticipated, and the next critical phase is the prime ministerial voting process. An expected vote next week could see the Pheu Thai Party retain its coalition government, though narrowly. Delays exceeding a month in government formation or political shifts could negatively impact the Thai stock market.
Political uncertainty is likely to cause negative reactions in the stock market, with the SET Index potentially fluctuating sideways down, testing the 1,230 support level. A smooth prime ministerial vote is crucial; any delays in forming a new government could push the next support level to 1,200-1,220 points, with resistance at 1,260-1,270 points. Historically, the SET Index has responded positively to recent prime ministerial votes, showing gradual increases over subsequent weeks.
Mr. Narongdej Chantapaisan from Ira Securities highlighted that foreign investors are cautious, delaying investments in Thai stocks amidst ongoing uncertainties. The selection of a new prime minister is vital to monitor. The potential delay in 2016 budget spending could further impact the economy in the latter half of the year, already strained by trade war concerns. The Pheu Thai Party's strategy and possible formation of a new political coalition require close observation, with further developments expected over the weekend.
Ms. Chayawadee Chaianan from the Bank of Thailand noted that the continuity of established policies and measures will significantly impact the Thai economy amidst political changes, especially concerning the 2026 budget, which has been approved by the House of Representatives. Implementing planned measures is crucial, offering a clearer outlook amid recent political uncertainties. In the short term, US reciprocal tariffs pose a greater impact, while structural issues present long-term risks.