The upcoming general election could dampen investor confidence if the victorious parties fail to form a new government, according to the Federation of Thai Capital Market Organizations (Fetco).
Fetco chairman Kobsak Pootrakool said on Tuesday if a conflict arises after the May 14 poll and a government is not formed based on a majority of seats, investor stability could be undermined.
On the other hand, if a new government is set up successfully, investor confidence should increase, said Mr Kobsak.
"I think we still have to keep an eye on what's going to happen next. At the very core, stock market sentiment is looking for government stability," he said.
Fetco's investor confidence index for April, which forecasts the next three months, was neutral at 110, up 15.1% from the previous month. Among the most attractive sectors are tourism, banking and health.
Petrochemicals and energy remain the least attractive among investors.
Only foreign investors' confidence rose in April, growing 66.7% to 125 points, while confidence among institutional investors dipped 14.3% to 112.5, followed by a 13.6% decline among retail investors to 96.8, and a 12.5% fall among proprietary investors to 87.5.
US Federal Reserve interest rate hikes were the biggest negative influence on the stock market, the Fetco survey found, followed by Thailand's political situation.
"Meanwhile, 17.3% of retail investors see the upcoming general election as an upside opportunity that could have a positive impact on the stock market. Other useful factors include fund flows and the recovery in tourism," said Mr Kobsak.
According to the survey, Thailand's economy is projected to grow by 3% in 2023, mainly driven by rising numbers of tourists, which reached 6 million in the first quarter. The recovery in the current account, which has rebounded to US$5 billion per month, has strengthened the Thai currency, which is now trading at around 34 baht to the greenback.
"As other regions in the world are expected to enter a recession later this year, I think short-term stimulus from the new government is necessary," he said.
