Stock market analysts have expressed unease about the post-election political situation, saying a delay in the formation of a new government would affect the country's GDP and encourage foreign investors to continue dumping Thai shares.
Sorrabhol Virametekul, senior vice-president of Kasikorn Securities, said it is uncertain whether the Move Forward Party (MFP) can mobilise enough support from other parties and senators to reach the 376 votes required for MFP leader Pita Limcharoenrat to become the country's next prime minister. If the MFP is unable to mobilise sufficient support, the Pheu Thai Party, which received the second-most number of votes in the May 14 election, would take the lead in forming a government, said Mr Sorrabhol.
Since May 15, foreigners have sold Thai stocks and bonds worth a combined 25 billion baht amid uncertainty surrounding Thai politics, he said.
The earliest the House of Representatives can hold a meeting is in August, assuming the winning parties succeed in obtaining 376 votes, said Mr Sorrabhol.
"A delay in establishing a new government until October will decrease GDP by 0.1% this year," he said.
If the MFP successfully forms a new government, there would be concerns for SET50 big-cap stocks, including those involved in power generation and telecom who fear their concessions might be reviewed, said Mr Sorrabhol.
"The worst-case scenario would be if street protests happened. If so, foreigners would lose confidence about investment in Thailand," he said.
Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, said Thailand has a relatively high level of public debt at 61% of GDP, while economic growth stands at around 5% on average, compared with growth of 7-10% a decade ago.
Most political parties, especially those that are set to form the new government, have laid out policies that require a large budget.
"If their plans to generate more revenue are unclear, it will cause further weakness in terms of the country's fiscal status," he said. "I want to see policies that will make the country economically stable in the long term and help people have a reliable income. Those could include investing in infrastructure and logistics, which are the basis for increasing economic and social prosperity in a sustainable manner, and are cost-effective in terms of budget."
Investors should monitor the progress of the memorandum of understanding scheduled to be signed between the MFP and other parties, particularly the Pheu Thai Party, said Mr Therdsak.
