Concerns over rising global interest rates and domestic political uncertainties dragged down the Thai bourse to below 1,500 points again on Thursday, say analysts.
The Stock Exchange of Thailand (SET) remains under pressure following months of political ambiguity.
Asia Plus Securities (ASPS) projects the SET index will rebound significantly to 1,600 points if the vote for a new prime minister is not prolonged from next week, with a new stable and unified government formed.
The SET index dipped by 1.22% on Thursday to finish at 1,490.46 points, in trade worth 45.7 billion baht.
Kitpon Praipaisarnkit, vice-president of UOB Kay Hian Securities Thailand, said external factors were another reason the Thai index dropped sharply yesterday, specifically the US Federal Reserve's hawkish stance on interest rate hikes.
In addition, investors are worried about the Chinese banking sector suffering from a weak economy.
Goldman Sachs downgraded top Chinese lenders including Agricultural Bank of China from "remain investment weight" to "sell", while the Industrial and Commercial Bank of China (ICBC) and Industrial Bank were both downgraded from "buy" to "sell".
ASPS evaluated the likelihood and impacts on the SET for three political scenarios. If the senators vote to support Pita Limjaroenrat, leader of the Move Forward Party, to be premier with more than 376 votes on the first vote, the SET index would move in a range of 1,550-1,600 points.
If the senators do not vote for Mr Pita, but support another candidate from the eight parties that signed the memorandum of understanding to form a coalition government, the SET index would move in a range of 1,480 to 1,550 points, said ASPS.
If the senators do not vote for Mr Pita and switch to other political parties outside the coalition for a premier, the index will retreat based on downside risks, said the brokerage.
In a related development, the Federation of Thai Capital Market Organizations' (Fetco) investor confidence index for June, which measures sentiment for the next three months, was 81.6, up 5.1% from the previous month, returning to the "neutral" level.
The factors that influenced investor confidence were uncertainty about the formation of the government, followed by geopolitical conflict, capital outflows, the impact of Stark Corporation's fraud, and concerns about the movement of US interest rates.
The SET index fell below 1,500 points during the last week of June to hit a two-year low, but rebounded to above 1,500 by the end of month. The average daily trading value in June was 47.6 billion baht.
Foreign investors remained net sellers last month, tallying more than 8.62 billion baht. For the year to date, foreign investors are net sellers of 106 billion baht, according to Fetco.
