Political uncertainty and global headwinds could weigh on Thai market: CGSI

Business Times

23-05-2025

[SINGAPORE] Thailand's stock market is likely to face continued pressure from political uncertainty and global economic headwinds, CGS International (CSGI) said.
Kasem Prunratanamala, the chartered financial analyst of CGSI Thailand research team, noted on Wednesday (May 21) that the aggregate net profit of Thai corporations under their coverage remained flat year on year in Q1 2025.
Quarter on quarter, however, there was a strong 40 per cent rise.
The sectors with the most significant quarter-on-quarter net profit growth included electronics, construction, food and telecommunications. The sectors that delivered the weakest quarter-on-quarter growth included hotels, consumer and property.
Several Thai companies, particularly those in banking, construction, and oil and gas, exceeded expectations with their Q1 earnings. Conversely, the service and transportation sectors reported results that fell short of forecasts.
Prunratanamala cautioned, however, that political instability could hinder the government's effectiveness, especially amid a challenging economic environment.
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Thailand faces a 36 per cent US tariff if a reduction cannot be negotiated with Washington before a moratorium expires in July. The US has set a 10 per cent tariff for most nations while the moratorium is in place.
Tensions between Thailand's ruling Pheu Thai Party and its coalition partner Bhum Jai Thai (BJT) have intensified on the back of disputes over key policies such as cannabis legalisation and minimum wages.
The continued tit-for-tat between the parties can undermine the unity and may affect the coalition's long-term stability, the analyst noted.
He added: 'A worst-case scenario for Thai politics now is a house dissolution, with a six-month limbo period before a new government takes office.
'Even so, we believe an interim government will not be able to do its job as the conflict between the two parties is likely to prolong,' said Prunratanamala.
He added that a second-worst case scenario would be BJT's expulsion from the coalition, which would result in a major Cabinet reshuffle. As BJT is widely believed to have influence over most of the senators, CSGI believes that it will be difficult for any major government Bills to pass through parliament under the current political environment.
After a roughly 10 per cent rebound from recent lows – driven by hopes of easing global trade tensions – CSGI believes the Stock Exchange of Thailand (SET) is now fairly valued at around 12 times its 12-month forward price-to-earnings (PE) ratio.
However, ongoing political tensions between the Pheu Thai and BJT parties are likely to keep market sentiment weak, said Prunratanamala.
As a result, CGSI has reaffirmed its SET Index target of 1,200 points, based on a projected FY2026 P/E ratio of 13.4 – one standard deviation below the 10-year average.
In terms of investment strategy, CSGI is turning more defensive.
'We prefer domestic-focused, high-yield stocks,' Prunratanamala said.
CSGI has removed Berli Jucker Public Company, Minor International Public Company, and Carabao Group from its top picks, and added The Erawan Group and Gulf Development.
On the upside, Prunratanamala added that potential Bank of Thailand rate cuts and government stimulus could help support the market if implemented.