Thai stocks rise briefly and baht strengthens as opposition parties make significant election gains
A man reads a Thai newspaper featuring front page coverage of Thailand’s general election at a newsstand in Bangkok on May 15, 2023. (Photo by Lillian SUWANRUMPHA / AFP) (Photo by LILLIAN SUWANRUMPHA/AFP via Getty Images)
Lillian Suwanrumpha | Afp | Getty Images
Thai stocks rose briefly while the Thai baht momentarily touched a three-month high on Monday, as investors cheered preliminary results showing the country’s pro-democracy parties securing a strong majority in Sunday’s general election.
Still, it remains to be seen which parties will eventually form the new Thai government as a coalition is needed since both opposition parties don’t have enough votes to form a new government.
A calculation by Reuters based on data from the country’ Election Commission suggests the anti-military Move Forward party, led by Thai businessman Pita Limjaroenrat, would win the most seats, followed by the Pheu Thai party.
If confirmed, this would represent a resounding rejection of pro-military parties led by former prime minister Prayut Chan-o-cha, ending nine years of pro-military rule.
Official certification of the results are expected to be finalized within 60 days after the polls close.
The Set Composite Index briefly traded 0.3% higher at the open on Monday before paring gains and was last trading 0.2% lower.
The Thai baht strengthened 0.6% on Monday to 33.73 against the U.S. dollar, its strongest level since February earlier this year.
“We have to bear in mind that there have been a lot of tricky business in Thai politics over the years,” Thitinan Pongsudhirak, Professor of Politics and International Relations at Chulalongkorn University told CNBC’s Sri Jegarajah in Bangkok.
“The largest winning party should be able to form the government, but that’s not the case. There are three steps to it: Winning the elections is one thing, forming the government is the second proposition and the biggest challenge to get you on Prime Minister,” he added.
The Pheu Thai party has put forward Paetongtarn Shinawatra — the daughter of former Thai prime minister Thaksin Shinawatra — as its candidate for prime minister, while Reuters reported that Limjaroenrat also has “set his sights set on being prime minister.”
First quarter GDP
Separately, Thailand’s gross domestic product for the first quarter grew 2.7%% year-on-year, beating expectations of a 2.3% rise.
Ahead of the election’s results, Citi economist Nalin Chutchotitham wrote in a Sunday note that Thailand’s economic outlook is likely to be little changed in the following months.
“We expect Q1 GDP growth to remain tepid, but sufficient to signal that the economy bottomed out in Q4 2022, which would support the BOT [Bank of Thailand]’s rate hike,” she said.
Thailand’s central bank’s policy currently stands at 1.75%, and will next meet on May 31. Citi expects the Bank of Thailand to raise its benchmark interest rate by another 25 basis points.
Chutchotitham also expects the new government to be confirmed in August and the economy’s full-year 2023 fiscal budget slated to be announced sometime in the final quarter of the year.
“Over the medium-term, economic outlook could see increased risks of populist economic policies which could raise questions on future fiscal discipline,” she wrote.
— CNBC’s Jihye Lee and Clement Tan contributed to this report.
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