Thai stocks may fall to Covid lows amid political crisis: analysts
[SINGAPORE] Thailand's stock market cannot catch a break – the fallout from a major political crisis may further rock the worst-performing market in the world this year.
Amid the existing headwinds from tariff uncertainty and the faltering tourism revenue, the Stock Exchange of Thailand's (SET) benchmark index has already wilted 23.8 per cent since the start of the year as at Friday (Jun 20), placing it last among all global equity indices, according to Bloomberg data.
The market sell-off intensified in recent days as political jitters flared, following a leaked phone call between officials in Bangkok and Phnom Penh which heightened tensions along the Cambodian border. With economic headwinds already pressuring sentiment, analysts warn the bloodbath on the bourse may not yet be over.
'If foreign fund outflows accelerate and the prime minister faces calls to resign or a no-confidence vote, the SET Index could test 2020 Covid lows,' said Manish Bhargava, chief executive at Straits Investment Management. The index had fallen to a low of 969.1 points in March 2020, a level not seen since late-2011.
Thailand's stock exchange was the worst-performing bourse in Asean on Thursday, with the SET Index plunging 2.4 per cent to 1068.7 – its sharpest drop this year – after the call was leaked on Wednesday. While other regional markets also posted losses, they did not match the scale of the Thai sell-off, underscoring growing investor unease as the kingdom faces domestic instability and macro headwinds.
The losses came as a leaked phone call between Thai Prime Minister Paetongtarn Shinawatra and former Cambodian prime minister Hun Sen on Wednesday incited the Bhumjaithai Party (BJT) to announce its exit from the ruling coalition government.
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BJT's withdrawal leaves the ruling coalition, led by Paetongtarn's Pheu Thai Party, with a slim majority by just 18 seats. As calls for her resignation escalate and other coalition partners threaten to withdraw, uncertainty has arisen over the possibility of a Cabinet reshuffle, or a snap election that may lead to a political stalemate.
This could mean a three to six-month wait for a new government to take office, said CGS International (CGSI) analyst Kasem Prunratanamala in a note on Wednesday night. 'We believe that it would be difficult for the SET to perform during this period.'
Bhargava noted: 'Key sectors that are sensitive to political stability – banks, infrastructure and utilities – will likely lead declines.'
Others, however, remained optimistic. OCBC Asean economists Lavanya Venkateswaran and Jonathan Ng maintained a baseline scenario of the political situation staying contained in a note on Jun 18, citing Paetongtarn's reconciliatory tone.
The SET Index closed lower on Friday at 1067.6 points, falling 0.1 per cent.
Tourist slump
A slump in tourist arrivals to Thailand has reverberated through its economy, with the sector accounting for around 12 per cent of gross domestic product and employing more than 20 per cent of workers in 2024, according to the Bank of Thailand (BOT).
Foreign tourist arrivals to the country dipped 11 per cent in May from the previous month, continuing what has been a slow start to the year for the industry. The 14.3 million tourist arrivals during the first five months of 2025 were down 2.7 per cent from the previous corresponding period last year, and brought in 1.9 per cent less revenue at about 668.4 billion baht (S$26.2 billion), according to a Bank of America note.
The bourse's tourism sector, comprising stocks including spa operator Siam Wellness Group and hotel operators Central Plaza Hotel and Erawan Group, has fallen about 23.4 per cent since the start of the year.
But hopes of a sector-wide revival have also led some analysts to look with more optimism at stocks that have been battered hard by the slump. 'The tourism sector has already priced in the bad news,' UOB said in a Jun 5 note, naming stocks such as Erawan Group and mall operator Central Pattana as rebound plays. 'We expect tourist arrivals to recover in the third quarter of 2025,' said UOB analysts Kitpon Praipaisarnkit and Krit Tanarattananon.
Yet while the tourism sector's dips may have bottomed out, CGSI analyst Thanapol Jiratanakij does not foresee a 'swift recovery' in arrivals – largely owing to the declining popularity of the nation among Chinese tourists.
Increasing safety concerns from incidents such as the abduction of a Chinese actor in January and an earthquake in March have put off some Chinese nationals, who have turned towards domestic tourism and other regional alternatives for leisure travel.
Existing headwinds to tourist arrivals have also hit the country's retail sector, highlighted by unlisted retailer King Power's request to terminate its duty-free concession contracts with Airports of Thailand.
Maybank had earlier downgraded the broader retail sector to neutral, with companies such as department store operator Central Retail receiving 'hold' ratings. The bank cited sector-wide headwinds in muted consumption, falling tourist arrivals and a subdued economic outlook.
'Restoring confidence among Chinese tourists will require real improvements in safety and perception,' CGSI's Thanapol said. 'In this regard, we believe the government still has considerable work to do.'
But as Paetongtarn's leadership remains uncertain, such efforts to boost the domestic economy may no longer be on the cards. 'The timing could not be more inconvenient considering (the) external headwinds,' said OCBC's Venkateswaran and Ng.
As observers await the BOT's policy decision on Jun 25, ANZ Asia economist Krystal Tan expects the central bank to hold its benchmark rate at 1.75 per cent until the fourth quarter – but a worsening political gridlock may force the BOT into a rate cut.
This may provide a catalyst to Thai stocks amid the wavering political situation, said CGSI's Kasem. He maintained the index's target at 1,200 points, citing its relative undervaluation to its peers.
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