Thailand needs to install a new coalition government headed by prime ministerial frontrunner and Move Forward Party (MFP) leader Pita Limjaroenrat at the earliest to allay investor concerns and stem an exodus of foreign funds from the nation’s stocks and bonds, according to Srettha Thavisin, a core member of the Pheu Thai Party.
An early government formation is needed to clear the post-election political uncertainty and allow the economy to move forward, Mr Srettha, a former real estate tycoon who is one of the three prime ministerial candidates of Pheu Thai, said on Twitter on Wednesday.
Mr Srettha addressed more than 100 foreign investors representing about 80 global funds at a meeting hosted by CLSA Securities Thailand on Tuesday, and their attendance showed Thailand remains an attractive destination for them, he said. Publicly-listed Thai companies continue to perform well and political progress needs to be made by forming a government that reflects the will of the people, he said.
The political uncertainty stemming from legal challenges to Mr Pita’s bid to form a government even after pro-democracies parties swept the May 14 election has spooked investors. They have pulled out a net US$2 billion from Thai stocks and bonds since the vote, and the baht has lost more than 2.5% to trade near a three-month low.
Mr Srettha said investors do not view formation of a unity government as a solution and they are sensitive to such a suggestion. As Thailand competes with neighbours such as Vietnam and Indonesia to attract foreign investors, nations moving slowly will be at a disadvantage, he said.
An eight-party coalition of pro-democracy parties led by Pitas’ Move Forward has staked a claim to form the next government. Even though the bloc commands the support of about 62% of the lawmakers in the 500-member House of Representatives, it’s still short of the threshold of 376 votes needed to ensure Pita’s win in a joint sitting with the 250-member Senate.
Mr Pita also faces allegations of violating elections rules by owning shares in a defunct media firm, which some analysts say can derail his bid to become the prime minister. A majority of the Senate opposes Pita as his party has pledged to amend the lese majeste law.
The stalemate has hurt sentiment of investors and domestic manufacturers. An investor sentiment index dropped to an eight-month low in May, slipping into a “bearish zone,” and political uncertainty may continue to weigh on financial markets over the next three months, according to the Federation of Thai Capital Market Organizations (Fetco).
Most businesses have temporarily frozen new investment decisions until clearer directions from a new government emerges and as exports remain weak, Kriengkrai Thiennukul, chairman of the the Federation of Thai Industries, said on Wednesday.
