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Mar 26, 2023
Here’s How Investors Can Prepare for the Thai General Election
(Bloomberg) -- Thai stocks linked to domestic consumption are set to be key beneficiaries as political parties pledge to unleash $92 billion of stimulus heading into a May 14 general election.
The policies pledged by nine major political parties in Thailand’s second general since a 2014 coup may prove a near-term catalyst for the country’s beaten down stocks, according to money managers and analysts. Consumer staples, banks and property companies’ shares, along with those linked to firms with executives shifting into politics are seen as key beneficiaries.
Thai Politicians Dangle $92 Billion Worth of Campaign Promises
With the opposition seeking to end a near-decade rule by ex-generals including Prime Minister Prayuth Chan-Ocha and their associates, the biggest difference in the economic policies of the major parties contesting the poll is the spending they’re projecting.
Thailand’s stocks have climbed more than 4% from a March low, outperforming the regional gauge in the period and narrowing its year-to-date losses. The measure has rallied in the three months before the past five elections, with an average return of 5.5% and similar gains in the month following the poll, according to Kasikorn Securities Pcl and Maybank Securities Thailand Pcl.
Hopes that a new administration will deliver may be premature, with Nomura Holdings Inc. predicting a fall in state spending due to the delay in forming a government. The nation’s economy has lagged behind Southeast Asian peers with a post-pandemic recovery of 2.6% growth last year compared with 8.7% and 7.4% for Malaysia and Vietnam, respectively.
An economic recovery is gathering pace with a rebound in tourism, which has partly helped the baht strengthen 1.1% this year. Thailand’s central bank may this week decide on a fifth straight interest rate increase to ward off price pressures.
Bloomberg spoke to money managers and analysts on the best strategies for investors ahead of the vote.
Wijit Arayapisit, strategist, Maybank Securities Thailand
- The stock market tends to have positive expectations of changes on optimism about the acceleration of new economic stimulus measures to support the economy for better growth
- Industry sectors that tend to improve well before the election are information and communication technology, media, commerce and food
- Recommended stocks include Advanced Info Service Pcl, Com7 Pcl and Thai Union Group Pcl
- Investors must also consider the polarity of government formation after the election
Padon Vannarat, strategist, Yuanta Securities Thailand Co.
- Money spent on this coming election is expected to be about 60 billion baht ($1.76 billion) to 70 billion baht, exceeding most other previous polls, which averaged about 50 billion baht
- New legislation allows political parties to boost their campaign spending
- This will benefit the domestic economy and industries such as retail, banking, beverage, telecommunication and media
- Companies with links to some political parties, such as Sansiri Pcl, SC Asset Corp Pcl and Praram 9 Hospital Pcl, will also get a boost from the rising popularity of related politicians
Varorith Chirachon, analyst, SCB Asset Management Co.
- The election is positive for the market because all political parties are campaigning for more spending that would boost the economy and companies’ earnings
- The poll will offer relief for Thai equities after the global banking crisis
- After the election, the market will also benefit from any new government implementing fiscal and stimulus spending to meet their campaign pledges
- Sectors to benefit are those linked to domestic consumption such as commerce and media
- The return of Chinese tourists will also boost tourism growth further, providing a key catalyst for the stock market
Srikanya Yathip, secretary-general of Thailand’s Government Pension Fund
- Government fiscal stimulus and the central bank’s prudent monetary policy have really supported Thailand’s economic recovery, despite Russia-Ukraine tension and US interest rate increases
- The election will be another catalyst for the economy in addition to the return of Chinese tourists
- High inflation and weak exports will still pose the key risks to the stock market
- The new government’s economic stimulus will boost investors’ confidence and the stock market
Nuttachart Mekmasin, strategist, Trinity Securities Co.
- Normally, domestic demand sectors outperform during the pre-election period due to consumer impulse spending and expectations of infrastructure projects
- Banks, commerce, property, media, construction material and services stand to gain most, with a drop in the SET Index to 1,580-1,600 presenting a safe zone for accumulation
(Adds baht performance in sixth paragraph.)
©2023 Bloomberg L.P.
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