Thai Stocks Jump as Election Progress Aids Market Sentiment

(Bloomberg) -- Progress toward long-delayed elections in military-run Thailand bolstered the bullish case for the country’s markets, pushing equities up the most in almost two years.

Thailand’s King Maha Vajiralongkorn on Wednesday approved legislation for the election of members of parliament and the selection of senators, paving the way for a poll by May. Prime Minister Prayuth Chan-Ocha, the former army chief who seized power in a 2014 coup, has said Feb. 24 is the earliest date for voting.

The SET Index of equities climbed 2.3 percent, the most since October 2016, while the baht strengthened as much as 0.8 percent against the dollar to a two-week high. Clear moves toward elections in the first half of next year "would support the macroeconomic outlook and impact sentiment and Thai assets positively given current low expectations, thus supporting inflows," Tim Leelahaphan, an economist at Standard Chartered Bank in Bangkok, wrote in a note.

Resilient Baht

The baht has been a stand-out currency amid the recent rout in emerging markets. It’s appreciated 1.5 percent against the dollar so far this quarter, the best performer among major Asian currencies and the only gainer among them.

While the baht’s advance Thursday was mainly triggered by dollar weakness, the legislative steps provided support as they probably led investors to think the election won’t be delayed again, according to Roong Sanguanruang, a market analyst at Bank of Ayudhya Pcl.

So far this quarter, foreign investors pulled a net $1 billion from Thai stocks but purchased a net $2.6 billion of bonds. Domestic buyers have supported the local stock market, with the SET index up about 8 percent since the end of June, compared with a drop of roughly 5 percent in the MSCI Emerging Markets Index.

The election timeline has been repeatedly delayed in Thailand, which has had about a dozen military takeovers since 1932 and suffered bloody political clashes before the most recent coup.

The election will likely be in May, but a further delay is also possible, said Paul Chambers, lecturer and special adviser on international affairs at Naresuan University’s College of ASEAN Community Studies in northern Thailand.

“The date for the election would depend upon when the coronation is announced because Prayuth said that the election cannot take place before the coronation," he said. "If there’s unrest, it’s possible that the election might be delayed even further. But the longer they stay, the worse their public image will be."

Prayuth said in an interview in June that the election and coronation can be worked on in tandem. Vajiralongkorn ascended to the throne in 2016 but his formal coronation is pending.

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