Rebuilding Thailand's stock market

 

To heal its ailing stock market, Thailand needs a potent prescription of strategic reforms and a targeted focus on high-growth sectors, Paiboon Nalinthrangkurn, TISCO Securities CEO and director of the Federation of Thai Capital Market Organisations (FETCO) told a seminar on Monday (March 24).

 

Speaking at the Sasin Corporate Leadership Insights conference hosted by Sasin School of Management, he said that developing the nation into a regional medical and wellness hub was a key opportunity and should be coupled with addressing critical structural weaknesses in supply and demand and mitigating risks such as potential US tariff sanctions.

 

The Thai stock market is at a critical juncture, contending with significant hurdles after a decade of disappointing performance, he said, stressing the urgent need for decisive action to restore growth and investor confidence.

 

A primary factor weighing down the Thai stock market is the nation’s sluggish economic growth.

 

“When you invest in the stock market, you will automatically compare returns with those offered by other competitors,” Paiboon pointed out, highlighting Thailand's underperformance compared to regional peers.

 

From 2013 to 2024, Thailand's average growth rate was 1.9%, lagging significantly behind Malaysia (4.2%), Indonesia (4.4%), and Vietnam (nearly 6%).

 

Paiboon Nalinthrangkurn

 

Compounding this issue is the decline in corporate earnings. Paiboon revealed that corporate earnings per share have plummeted by 37% since their peak in 2017.

 

“Share prices can't go up when earnings do not go up,” he stated, drawing a direct correlation between the slump in earnings and the market's lacklustre performance.
 

 

In addition, the Thai stock exchange faces significant structural weaknesses stemming from imbalances in both supply and demand.

 

On the supply side, Paiboon emphasised the lack of diversity among listed companies and observed that the exchange is heavily weighted towards traditional industries.

 

This under-representation of high-growth sectors, such as technology and healthcare, limits the market's appeal to investors and its potential for dynamic growth.

 

Furthermore, the Thai economy has suffered from prolonged underinvestment, which has constrained its productive capacity.

 

The market also grapples with demand-side challenges with Paiboon highlighting the consistent outflows experienced over the past decade.

 

 

The discontinuation of the Long-Term Equity Fund (LTF) program, previously a key driver of domestic investment, has contributed to substantial outflows, alongside a trend of increasing offshore investment by Thai investors.

 

Foreign investors, too, have been net sellers of Thai equities for several years, further weakening demand for Thai stocks.
 

 

A multi-pronged approach will be vital to reviving the Thai stock market, Paiboon said, adding that a sustained pick-up in economic growth is crucial.

Boosting investor participation: Expanding the investor base is essential. Paiboon highlighted the success of Japan's Nippon Individual Savings Account (NISA) in encouraging household savings to flow into investments and suggested that Thailand adopt a similar scheme.

Regulatory reforms: Aligning regulations with global standards is vital to attract foreign investment and enhance market integrity. This includes modernising regulations to facilitate share buy-backs, dual-class shares, and address fraud.

Focus on high-growth sectors: Thailand should leverage its strengths and focus on developing sectors where it has a competitive edge, such as health and well-being, to attract new listings and enhance its international standing.

Addressing US tariff concerns: The potential for increased US tariffs under a second Trump presidency poses a significant risk. Paiboon highlighted the substantial trade surplus the US has with Thailand and the potential for retaliatory tariffs, which could severely impact Thailand's export-oriented economy.

 

 

Despite the challenges, Paiboon expressed cautious optimism about the potential for a rebound in the Thai stock market. He pointed to compelling valuations and the possibility of increased foreign investment as positive signs.

 

However, he stressed that the government must play a proactive role in addressing the structural issues hindering the market's growth.

 

“We must end this trend,” he declared, referring to the gradual decline in Thailand's economic growth, underscoring the urgency of the situation.

 

The road to recovery for Thailand's stock market will be challenging, but with concerted effort and a clear vision, the market can overcome its current difficulties and unlock its potential for sustainable growth, he concluded.