(Bloomberg) -- Thailand’s benchmark stock index fell less than regional peers, while the currency rose as investors assess the outlook for the nation’s markets after a pro-military party took the lead in the first general election since a coup in 2014.
The Palang Pracharath party is now poised to bring junta leader Prayuth Chan-Ocha back as prime minister even as anti-junta parties led by Pheu Thai are also set for substantial lower-house seats. The outcome will prompt a review of exposure to Thai assets as foreign investors have withdrawn in excess of a net $700 million from its stock and bond markets this year.
Thailand’s SET Index lost 0.8 percent as of 10:30 a.m. in Bangkok, less than declines in the broader Asian benchmark amid a global sell-off triggered by economic growth concerns. The baht, Asia’s best performing currency this year, strengthened 0.6 percent to 31.584 against the U.S. dollar, while the 10-year sovereign bond was little changed.
“We believe local investors will likely take cheer at prospects of continuity and deliver a bounce lasting possibly several weeks,” Credit Suisse (SIX:CSGN) Group AG analysts including Dan Fineman wrote in a note. “We note, however, that the next government will be a weak and possibly unstable coalition and that the market is fairly expensive.”
Thailand’s benchmark SET Index has gained an average 6.6 percent in the month after four major polls dating back to 2001, according to data compiled by Bloomberg. The gauge has climbed about 4.5 percent this year, trailing a 7.8 percent advance in the MSCI Asia Pacific Index.
“Some investors are probably concerned about the stability of the new government,” said Win Phromphaet, the Bangkok-based chief investment officer of CIMB-Principal Asset Management Co. “PM Prayuth will extend his reign, but will face very strong opposition parties.”
“We will watch how alliances settle over the next 72 hours to get a better gauge of political control in the lower house,” Morgan Stanley (NYSE:MS) analysts including Sean Gardiner wrote in a note dated March 24. “We think this will be key for foreigners to return after their net sales of ~$7 billion of Thai equities over the last 12 months.”
So far this year, international investors have withdrawn a net $349 million from equities after a record selloff of $8.9 billion in 2018.
“Investors will probably buy back the baht as the major event risk is over for Thailand and also as the results are not far from what was expected,” said Hironori Sannami, an emerging-market currency trader at Mizuho Bank Ltd. in Tokyo. “Thailand is considered to be one of those countries where the politics don’t have much impact on its economic state.”
(Adds stocks move in lede and updates market moves in third paragraph.)
