The upcoming general election is likely to stimulate consumption, with around 60-70 billion baht to be circulated within the country’s economy, enhancing the Thai stock market both one week before and one month after the polls, say analysts.
The Stock Exchange of Thailand (SET) is expected to rebound around the time of the election, which according to projections is expected to take place on May 7, based on an announcement made by the Office of the Election Commission (EC) of Thailand, according to Yuanta Securities.
“We anticipate money circulation in the Thai economy to reach a high two months before the election, accounting for 0.3-0.4% of the country’s GDP,” the brokerage said in a report released on Wednesday.
The EC’s electoral budget for the election is 5.9 billion baht, 40% higher than the previous election held in 2019, which is attributed to a higher number of constituencies, up from 350 districts to 400, said the report.
“The increasing amount of money in economic circulation is one of the factors that stimulates consumption and helps limit the downside to GDP during the government’s transitional period,” said Yuanta Securities.
Among the Thai sectors expected to benefit during the upcoming election are banking, retail, real estate, food and beverage, and construction, attributed to the acceleration of money circulating in the economy.
The SET Index gained 0.66% to close at 1,668.63 on Tuesday after Prime Minister Prayut Chan-o-cha announced his decision to dissolve parliament next month.
Foreign investors were net sellers of more than 4.2 billion baht.
The research department of Globlex Securities said the premier’s statement on Tuesday boosted stock prices in the retail and food sectors, which are expected to benefit from the anticipated growth in consumer spending.
Yuanta Securities forecasts foreign investors will return to be net buyers after the election result is announced, while domestic investors would remain net buyers before the election, with an average volume of 11 billion baht expected during the two months prior to the election.
The brokerage said the Thai bourse has a tendency to perform better than other markets in MSCI Asia excluding Japan, based on data generated during previous elections.
“The SET Index is likely to surge 2.1% during the two weeks before the election and 5.1% one month after, potentially reaching 1,750-1,800 basis points in the next three months,” said Yuanta Securities in a report.
Predicting the election rally won’t last long, Asia Plus Securities said the SET Index usually provides good returns for the three months before an election based on the statistics from 2001-2019.
Returns averaged 3.9% during those periods, said the brokerage.
