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Investors in the Stock Exchange of Thailand (SET) are feeling the pain of a market that is going nowhere and is among the worst performing stock markets in the region despite having a government that trumpted itself as the ‘saviour’ of the falling markets.
Thailand’s SET Index has been on a decline mode and is down nearly 9% so far since the ‘economically smart’ Prime Minister Srettha Thavisin, took office on August 22, 2023. In 2-months since Srettha took office, the performance of the stock market has been anything but dismal.
The decline in the SET Index is among the worst and overshadows even the likes of Shanghai composite index (SSE), which has been reeling from the economic mismanagement of the Xi Jinping, and Thailand’s SET Index’s performance is a sharp contrast to Singapore’s Strait Times Index (STI), which has managed to rise by more than 2% over the same 2-month period.
The decline in the SET Index has accelerated since Srettha was voted in the parliament on August 22 this year. Year-to-date (YTD) the SET Index has been down by 16.64% (more than half of this number of 16.64% or 8.84% decline was in the last 2-months).
The Srettha administration argues that the persistent selling by foreign investors stems from Thailand’s low REPO rates, which currently stand at 2.50% compared to the Federal Reserve’s 5.25%–5.5%. However, this contrasts sharply with Japan’s negative rates, where markets continue to thrive. Japan’s Nikkei 225 index remains an attractive investment destination, despite a weakening yen and a resilient economy. The Japanese Yen has depreciated by 2.84% in the past two months; by comparison, the Thai Baht has depreciated by 3.25%. One might expect Thailand’s market to be more appealing under these circumstances, but unfortunately, that has not been the case.
Foreign investors have been fleeing the Thai stock market en masse, selling more than 168.67 billion Baht worth of Thai equities year-to-date. This is a sharp contrast to the 202,694.36 billion Baht in net buying that occurred in 2022—a year with minimal revenue from tourism, as the country had just begun to welcome foreign tourists after more than two years of COVID-19 lockdowns. In 2022, Thailand received a mere 11.5 million foreign tourists, generating 1.5 trillion Baht in revenue from both domestic and international visitors. This year, tourism revenue is projected to rise to 2.38 trillion Baht.
Time to Wake up and Smell the Coffee
The Srettha administration has been criticized for lacking the “right man for the right job,” particularly during the Cabinet allocations, where the 13-party coalition squabbled over their respective shares. As the global economy teeters on the edge of a slowdown, hopes that the Pheu Thai party-led government would stimulate Thailand’s economy appear increasingly remote.
Srettha was well aware that his government wouldn’t enjoy the typical “honeymoon” period, as it took three months to form the administration. With six months already elapsed since the election, the government’s term will end in just three and a half years. Given that any economic revival takes 12-18 months to manifest, the clock is ticking for the Srettha government to take action before public confidence wanes.
Small gestures like lowering electricity or fuel prices offer only superficial relief. More substantial measures must be implemented promptly to invigorate the economy. Attracting foreign investment is a lengthy process, further emphasizing the need for immediate domestic initiatives.
Exports showed signs of revival in September, rising 2.2% year-on-year (YoY), outperforming expectations of a 1.75% decline. Thailand’s exports to key markets, such as China and Hong Kong, increased by 15% and 80% YoY respectively. However, exports to the USA, Australia, South Korea, and ASEAN countries declined.
While there are some economic bright spots, Srettha and his cabinet need to prioritize domestic revival over international engagements. The time for focusing on domestic challenges is now, while elevating Thailand’s international reputation can be deferred to a secondary priority.
In the financial world, stock market performance is viewed as an indicator of investor expectations for the next 6-12 months. If the SET Index is any indication, Thailand’s economy appears to be entering turbulent waters in the coming months.