Bourse gains to be limited amid ongoing turbulence

The new prime minister, to be decided on through a vote later this week, will struggle to prop up the stock market as the new coalition would be short-lived and a weak mandate would restrict its ability to deploy new spending effectively, analysts say.

Political volatility following the Constitutional Court’s decision to disqualify Paethongtarn Shinawatra from the premiership due to an ethics violation on Friday will cap the Stock Exchange of Thailand’s gains in the near term.

The possibility is high that a minority government will be formed, and fresh elections will be called by December at the earliest, the analysts added.

Chak Reungsinpinya, managing director and head of research at Maybank Securities (Thailand), said that if either Anutin Charnvirakul from the Bhumjaithai Party or Chaikasem Nitisiri from the ruling Pheu Thai Party is nominated to become the next premier via the vote, they will require support from the People’s Party, which would mean accepting conditions for an early election.

“We expect an election within the next four months. This is one of the main conditions for any candidate to secure the People’s Party votes and both the Pheu Thai and Bhumjaithai parties have said they’re willing to work with the People’s Party under these conditions,” he said.

Nevertheless, Maybank does not expect the ongoing political uncertainty to have any significant impact on the economy.

“The choice of the next premier is less relevant given the likely short duration in power and, therefore, limited policy change,” noted Mr Chak.

As such, any positive or negative sentiment for stocks tied to a specific prime minister candidate is likely to be short-lived. The economy is set to slow down significantly in the second half of the year, he noted.

Piriyapon Kongvanich, a strategist at Bualuang Securities, outlined two main scenarios. The base case (with a 60% probability) would see the Bhumjaithai Party forming a coalition with the People’s Party, which could prompt the Pheu Thai Party to dissolve parliament, triggering a general election by December.

The alternative scenario (with a 40% probability) involves a Pheu Thai–People’s Party coalition that would likely remain in power for only four months before the dissolution of parliament, paving the way for elections no later than February.

“A minority government would face a limited governing window of around four months. While the 2026 fiscal budget bill may still be cleared by the Senate, the government’s short-time horizon and weak mandate would restrict its ability to deploy new spending effectively,” said Mr Piriyapon.

Historically, general elections have coincided with a 30%–40% drop in state investment disbursements compared with normal periods. This could trim GDP growth by about 0.2% in the fourth quarter of 2025 and the first quarter of 2026.

From a market perspective, a swift government formation could spark hopes for new stimulus measures, mirroring pre-election rallies seen in the past. On average, Thai equities have gained around 3% in the three months before an election, particularly in domestic consumption-linked sectors such as banks, retail, finance, and food, said Mr Piriyapon.

“However, such rallies have become less frequent, occurring only twice in the past five elections, typically under conditions of stable politics and a supportive economic outlook,” he said.

For the upcoming election, multiple legal cases against major political parties and a slowing economy under a minority government reduce the likelihood of a strong pre-election rally, he added.

Source – Bangkok News