Bangkok, July 11, 2024 – The Stock Exchange of Thailand (SET) continues to face significant challenges as it remains in a prolonged slump. The index contracted by 8.11% in the first half of 2024, making it the worst-performing market in Asia during this period. This downturn is attributed to a mix of domestic political instability and international economic factors.
The SET index slipped below the critical psychological threshold of 1,300 points twice within a month, hitting 1,288.58 points on July 2, 2024. This marks a severe underperformance compared to other Asian markets. While other regions experienced growth, Thailand’s bourse, alongside those of Indonesia and the Philippines, fell into negative territory.
Political uncertainty looms large over Thailand’s market. The ongoing deliberations by the Constitutional Court regarding the dissolution case against the Move Forward Party and the legitimacy of Prime Minister Srettha Thavisin’s cabinet have created an atmosphere of instability. This has significantly impacted investor confidence, contributing to substantial foreign equity outflows.
Internationally, the strength of the US dollar, buoyed by the Federal Reserve’s cautious approach to interest rate cuts, has further strained the SET. The Fed’s latest projections indicate only a minor rate cut of 0.25 percentage points for the remainder of 2024, a stark contrast to earlier expectations of more substantial reductions. This has widened the interest rate gap between the US and Thailand, prompting Thai investors to seek returns abroad.
To mitigate these challenges, the Thai government has proposed several measures aimed at bolstering the local equity market. The Finance Ministry, in collaboration with stock market regulators, plans to increase tax allowances and reduce lock-up periods for holders of Thai ESG (TESG) funds. Investments up to 300,000 baht in these funds will now be eligible for tax deductions, an increase from the previous limit of 100,000 baht, with the required holding period reduced from eight to five years.
Additionally, the government is considering the establishment of a new fund similar to the Vayupak Fund, which historically focused on Thai shares with strong fundamentals. This initiative is expected to inject at least 100 billion baht into the capital market.
In a bid to curb market volatility, the SET imposed an uptick rule on July 1, 2024, aimed at reducing short selling transactions. This measure increased transaction costs for retail investors but effectively reduced the daily value of short selling, leading to a temporary recovery in the market.
Despite these efforts, analysts predict that the SET will remain range-bound in the near term due to the ongoing political overhang and cautious foreign investor sentiment. The market’s future trajectory heavily depends on the resolution of political uncertainties and the global economic climate.
As Thailand navigates these turbulent times, the strategic implementation of government policies and international market dynamics will play crucial roles in shaping the SET’s recovery. The coming months will be critical in determining whether the market can rebound from its current slump and regain investor confidence.
