Despite renewed hope for US-China trade negotiations and reduced concerns over Thailand's credit rating, the local stock market is expected to experience notable swings this month as domestic political risks escalate, say analysts.
The Stock Exchange of Thailand (SET) index dipped by nearly 1.8% to less than 1,300 points in mid-afternoon trade Wednesday as global bourses surged after White House spokesperson Karoline Leavitt announced that President Donald Trump and Chinese President Xi Jinping are likely to speak by the end of this week.
Market concerns about the Thai credit rating should ease after S&P Global Ratings reaffirmed on June 2 Thailand's sovereign credit rating at BBB+ with a stable outlook, easing fears of a downgrade, said analysts.
KGI Securities (Thailand) maintains a cautiously optimistic outlook for June, citing potential progress in US-China trade negotiations as several international media outlets reported Trump may soon meet with Xi, raising hopes of a breakthrough in trade talks.
"While sentiment in the first half of June is buoyed by easing of US-China trade tensions and Thailand's credit rating concerns, domestic political risks could pressure the market in the latter half of the month," the brokerage said in a research note, adding the SET index is projected to fluctuate within a 100-point range.
KGI cautions investors to remain vigilant for market volatility stemming from lingering uncertainties surrounding retaliatory tariffs, which remain under legal review in the US. In addition, Trump's unpredictable trade policy continues to inject risk into global markets.
In May, the Thai bourse lagged regional peers amid US-China trade tensions.
Adding to the market's weakness was the Thai government's decision to shelve the digital wallet stimulus programme, opting to reserve funds for long-term infrastructure projects.
"Mid-May saw a temporary global equity rebound after both the US and China signalled a willingness to reduce tariffs and resume negotiations. Progress has since stalled. Towards the end of May, the US legal system heard challenges to the tariff framework, clouding the outlook further," noted the brokerage.
Domestic stocks tied to private consumption and tourism significantly underperformed last month, as foreign tourist arrivals remained weaker than projected, said KGI.
Trinity Securities anticipates a rebound in early June, supported by reduced foreign portfolio rebalancing following MSCI index adjustments and a temporary pause in trade-related headlines.
However, the brokerage warned of growing domestic political uncertainty that could intensify from mid-June.
Technical pressure may also emerge later in the month, as institutional investors prepare for the exclusion of heavily-weighted Delta Electronics (DELTA) from the SET50 index due to upcoming changes in index calculation methodology effective in July.
Trinity projects the SET index to trade within a range of 1,100-1,210 points this month.
Fresh funds could flow into Thai ESG Extra funds this month, which are nearing the end of their initial public offering window, noted the brokerage.