Thailand’s stock exchange was down 9 points at the open on Monday morning after a historic election propelled the democratic-leaning parties, Move Forward and Pheu Thai, into pole position.
Elections introduce a degree of uncertainty into the market. Investors may be uncertain about the potential policies and reforms that will be implemented by the new government. Uncertainty can lead to cautiousness and a temporary pullback in investments until there is more clarity. This will likely be the case until one of the major parties can form a coalition with each other and there is clarity that there will be no extrajudicial or extra-parliamentary actions.
Elections often result in changes to economic policies, regulations, and fiscal measures. Depending on the political party or candidate that assumes power, there may be shifts in government spending, tax policies, trade agreements, or regulatory frameworks. These changes can impact specific industries or sectors, causing market fluctuations as investors reassess their positions.
Move Forward has said they would address monopolies that have dominated the Thai market which impacts many of the largest corporations in the country. Companies like Gulf Energy, that dominate their industry, are down up to 6.19 per cent at the open. The biggest movers outside of Gulf include BGrimm which is down 5 per cent, Srettha Thavisin’s former company Sansiri is down 8.4 per cent.
Like it or not, Thailand’s economic structure was relatively stable under the coup government and with a seismic shift there will be some reassessment and recalculation on the part of businesses.
It is important to remember that elections can affect investor sentiment, particularly if the outcome is unexpected or if there are concerns about political stability. Investors may become more risk-averse or adopt a wait-and-see approach until the political landscape becomes clearer. Sentiment-driven market movements can lead to short-term market dips.
Markets often price in expectations ahead of an election. If the election results are different from what was anticipated, as with what happened on Sunday, it can lead to market reactions.