Domestic political uncertainties continue to weigh on the Thai stock market, with the Stock Exchange of Thailand (SET) index sliding further yesterday, ignoring the pause in US interest rate hikes and Beijing's fresh rate cut.
Hong Kong's Hang Seng Index led regional gains, jumping 2.17%, while the Shenzhen Components and Shanghai Composite rose 1.8% and 0.74%, respectively.
The increases were mainly spurred by the People's Bank of China's rate cut on its medium-term loans, following a decrease in the bank's short-term loan rates earlier this week.
Japan's Nikkei edged down by 0.05% after trading higher for most of the day, while South Korea's Kospi also slid by 0.4%. The Thai bourse, which enjoyed early morning gains, slipped into the red by midday and closed at 1,557.71 points yesterday, down 0.22%.
Regional stock markets reacted calmly to the US Federal Reserve keeping interest rates steady in the 5.00-5.25% range on Wednesday.
However, nine out of 18 members of the Federal Open Market Committee see the benchmark overnight interest rate moving up another half of a percentage point to a range of 5.50-5.75% by the end of the year, while three others feel it needs to go even higher.
"Nearly all committee participants view it as likely that some further rate increases will be appropriate this year," Fed chief Jerome Powell said in a press conference after the meeting.
Kitpon Praipaisarnkit, vice-president of UOB Kay Hian Securities Thailand, said the Fed's pause in hiking rates could benefit the Thai bourse in the short term, but sentiment over the next 2-3 months remains clouded by domestic political uncertainty.
The Thai index year-to-date has lost about 6%, making it the second-worst performer among regional bourses, he said.
Kampon Adireksombat, the first senior vice-president and team head of SCB Chief Investment Office (SCB CIO), said the SET index could fall by as much as 8% from its current level of around 1,550 points if the government formation is delayed and it affects the 2024 budget disbursement.
The SCB CIO maintains a slightly positive outlook on the Thai stock market, assuming that listed company performance has already reached its lowest point and the economy can recover in the second half of the year.
"However, all the attention is focused on the establishment of the new government and political stability, as these factors play a crucial role in restoring confidence for foreign investors," said Mr Kampon.
In a base-case scenario, if the government is formed according to the announced time frame of mid-July, and the budgeting for 2024 is slightly delayed but manageable, the SET index is expected to reach 1,660 points by the end of 2023, a 7% gain from its current level, according to SCB CIO.
"However, in a worst-case scenario where the government formation is significantly delayed, affecting the preparation and disbursement of the 2024 budget, coupled with prolonged political uncertainty and policies, the SET index may face a potential decrease of around 8% from its current level," he said.
