The already battered The Stock Exchange of Thailand is set to face the wrath of investors today when it opens after the missteps of the incumbent government over the weekend, economists and strategists have come out to say.
The composite SET Index which has been one of the worst-performing equity markets in the region. It has been down by nearly 22 per cent over the past one year and after the rising wave of protest over the weekend and the use of water cannons laced with chemicals by the authorities, many fear that the worst is yet to come.
“The market could be disastrous at its opening bell,” said a strategist for one of the world’s leading banks.
“The move by the authorities was unwarranted, this is not going to go down well with the market when it opens on Monday (today),” the economist who is based in Singapore said.
He was not alone in his negative assessment of the way the market may perform today, others in Thailand and outside Thailand have raised similar doubts about the prospects of the economy and the stock market.
“If I have money in Thailand, I would think twice. I would for sure diversify to investing in international markets to avoid any major impact on the holdings,” said another economist at a large Asian banking giant who is also based in Singapore.
“I fear there could be a mass exodus of capital from Thailand because the protest has taken a new turn to target institutions that have never been talked about in the past,” this economist added.
Bad Move by Government
The strategist at the large American bank said that the move by the embattled government of General Prayut Chan-o- cha to battle with the protestors was one of the worst moves undertaken by the government as it has ignited a ‘hatred’ by those who were not supporting the protest movement or had a neutral stance.
“The move to use water cannon laced with the chemical at unarmed students and protestors, who were as young as in their teens has enraged many. I am a Thai citizen, and I did not support the ongoing protest but after Friday’s incident, I have to start doubting the government and its actions undertaken.”
But this he says it was not the only bad move undertaken by the government of Gen. Prayut. He said that the economy has been reeling from the mismanagement of this government for years.
Other economists and bankers were of a similar view.
“The economy had been limping even before the outbreak of the Covid-19 virus, the outbreak of the coronavirus has only exacerbated the decline of the economy,” said a senior banker with one of Europe’s largest banking groups.
The Bank of Thailand has said that the country’s economy in 2020 would likely contract by as much as 7 per cent while brokers have projected the economic decline to be as high as 11 per cent.
The key drivers of the economy whether exports, tourism or domestic consumption have all been battered by the pandemic and other factors.
Weak Economic Outlook & Fundamentals
Thailand’s economic malaise is something that should not surprise investors as the key drivers of the economy including the export sector and tourism sector has been on a downward spiral.
These two sectors account for more than 60-70 per cent of the gross domestic product (GDP), while consumption, another major component of the GDP, is set to face major obstacles as the Bank of Thailand’s debt moratorium that expires on October 21st is likely to not see an extension.
The Bank of Thailand has given a debt moratorium to the consumers and the small & medium-sized enterprises (SME) from March until October 21st but there has been no word yet if this would be extended or not.
There is a feeling that the debt moratorium is unlikely to be extended and this would mean that the non-performing loans of the financial sector could see a sharp increase.
“If you look at all these issues, the outlook does not look bright for Thailand at the moment for at least the short-term,” the economist with the Asian bank said.
“This is all going to make the recovery a much slower process for the country and this would not bode well for investors be it local or foreign.”
Foreign investors have already been net sellers of more than 289 billion baht of Thai equities so far this year and it is likely that they would sell more, economist and strategists say.