Bangkok: Thai stocks experienced a notable rally following the recent dissolution of parliament, with the index climbing to 1,254 points, marking an increase of 1.79% as of 10:54 AM. This unexpected surge has also contributed to tempering the appreciation of the Thai baht.
According to Thai News Agency, this movement in the stock market defies previous trends observed in similar political scenarios.
Mr. Nattapol Khamthakrue, Assistant Managing Director of Investment Analysis at Yuanta Securities, highlighted that historically, the Thai stock index tends to respond positively by about 1.2% the day following a parliamentary dissolution. He noted that after an initial fluctuation, the market typically returns to positive territory two weeks before the election, with potential further surges one month post-election if the government is formed smoothly. Notably, the only election where stocks declined was in May 2023, despite a record voter turnout of 75.64%. He added that even if the Move Forward Party secures a win, it may struggle to form a government, paving the way for the Pheu Thai Party to lead a coalition.
During this interim period, fiscal policies are limited, leaving monetary policy as a key tool for economic stimulation. The Monetary Policy Committee is anticipated to cut interest rates by 0.25% during its meeting on December 17th, reducing the rate from 1.50% per year. Analysts from SCB EIC and ttb analytics foresee further rate reductions in 2026 to 1.25% to address slower-than-expected economic growth.
Mr. Nattapol remarked that the stock market is currently in a sideways upward trend leading up to the anticipated election in February 2026. He advised investors to focus on trading dividend-paying stocks, particularly in sectors such as banking, telecommunications, retail, and REITs. A potential interest rate cut by the Monetary Policy Committee could offer additional benefits to the finance sector.
Mr. Poon Panichpibul, a strategist at Krungthai GLOBAL MARKETS, Krungthai Bank, reported that the Thai baht strengthened against the dollar, opening at 31.63 baht/dollar from the previous close of 31.77 baht/dollar. The baht's appreciation is supported by a weakening US dollar, with market confidence in the US Federal Reserve's planned interest rate cuts in 2026. Additionally, rising gold prices have bolstered the baht.
Despite these developments, uncertainties remain due to the political climate following the Prime Minister's announcement of parliament dissolution. Ongoing regional tensions, such as the conflict between Thailand and Cambodia, may further influence the baht's trajectory.