Thai Stocks Plunge 7% as Foreigners Sell $2.5B Amid Woes

Key Takeaway

• Foreign investors have sold $2.5 billion in Thai stocks this year, leading to a 7% drop in the Bangkok SET Index.
• Political uncertainties and a weak economy are driving investor caution, making Thailand the world's worst-performing market.
• Tourism-related stocks are suffering due to sluggish economic growth and low travel season, further dampening investor sentiment.

Foreign Investors Exit Thai Stocks

Foreign investors have been selling Thai stocks for 13 consecutive days, marking the longest stretch since January 26. This trend is partly driven by a sluggish economy, a weak currency, and political uncertainties. According to data compiled by Bloomberg, global funds have offloaded almost $2.5 billion of Thai stocks on a net basis so far this year. Other markets in the region, including Indonesia, Vietnam, and the Philippines, have also seen overseas investors withdrawing funds in 2024.

The equity benchmark Bangkok SET Index is down about 7% for the year and is near its lowest level since November 2020. Prime Minister Srettha Thavisin acknowledged on Tuesday that political risks might weigh on investor sentiment. With a 15% decline over the last 12 months, the SET Index is the world’s worst-performing market tracked by Bloomberg. "Weakness in EM currencies is causing some outflows in Indonesia and Thailand," said Tareck Horchani, head of prime brokerage dealing at Maybank Securities Pte. "Additionally, there are some political uncertainties in Thailand that could be contributing to investor caution."

Political Uncertainties

Political uncertainties in Thailand are adding to investor caution. In May, Thailand’s Constitutional Court accepted a petition by a group of senators seeking to remove the prime minister on grounds that his appointment of Pichit Chuenban as a cabinet minister violated the constitution’s ethical standards. Separately, the same court is due to review a petition by the nation’s election commission to dissolve the main opposition Move Forward Party on Wednesday.

These political developments are contributing to the overall negative sentiment in the market. "The allure of Thailand as a market has diminished," said Christina Woon, a fund manager at Eastspring Investments SP Ltd. in Singapore. She added that China has been a strong recipient of flows as investors reallocate in hopes of a long-awaited recovery, and to a lesser extent, Korea.

Impact on Tourism Stocks

The low travel season may also be impacting tourism-related stocks like Airports of Thailand Pcl, Central Plaza Hotel Pcl, Erawan Group Pcl, and Siam Wellness Group Pcl. Thailand’s economy, which relies heavily on tourism, grew only 1.5% in the first quarter. This sluggish growth is another factor contributing to the negative sentiment among investors.

"China has been a strong recipient of flows as investors reallocate in the hopes of a long-awaited recovery, and to a lesser extent, Korea," said Christina Woon. The weak economic performance and low travel season are making tourism-related stocks less attractive to investors.

Street Views

• Tareck Horchani, Maybank Securities Pte. (Bearish on Thailand and Indonesia):

  "Weakness in EM currencies is causing some outflows in Indonesia and Thailand... Additionally, there are some political uncertainties in Thailand that could be contributing to investor caution."

• Christina Woon, Eastspring Investments SP Ltd. (Bearish on Thailand):

  "China has been a strong recipient of flows as investors reallocate in the hopes of a long awaited recovery, and to a lesser extent, Korea... The allure of Thailand as a market has diminished."