Thai Political Turbulence: A Crossroads for Equity Markets in 2025

Thailand's political landscape is at a critical juncture, with Prime Minister Paetongtarn Shinawatra's government clinging to power by a thread. A leaked phone call, coalition defections, and mounting protests have sent shockwaves through the economy, plunging equity markets into turmoil. Investors must navigate this high-stakes environment with caution—and a sharp eye for opportunities hidden in the chaos.

Political Crisis and Market Fallout

The scandal began on June 15 when a leaked conversation revealed Shinawatra discussing Thailand's border dispute with Cambodia and criticizing a senior military commander. The fallout was immediate: the Bhumjaithai Party, the coalition's second-largest member, withdrew its support, stripping Shinawatra's majority to just 254 seats in a 500-member parliament. This collapse in confidence has triggered a cascading economic crisis:
- The SET Index has plummeted to a five-year low of 1,050 points, down 24% year-to-date.
- Foreign investors have pulled $4.2 billion from Thai equities over the past year.
- The baht has weakened to 32.78 THB/USD, with risks of sliding to 35.00 by year-end.

Sector-Specific Risks and Opportunities

The political storm has unevenly impacted sectors, creating both threats and openings for investors:

1. Tourism and Healthcare: Ground Zero

Thailand's tourism-dependent sectors are reeling. Airlines of Thailand (AOT) faces losses as King Power cancels duty-free concessions, while Middle Eastern tourist spending declines have hit healthcare stocks hard. The sector has dropped 15% year-to-date.

2. Defensive Sectors: A Ray of Stability

• Retail: CPALL (7-Eleven's Thai arm) and COM7 remain resilient, buoyed by domestic consumption.
• Financials: Siam Commercial Bank (SCB) has maintained strong balance sheets amid turmoil.

3. Export-Driven Sectors: Tariff Crosshairs

The U.S. is poised to decide by July 9 whether to impose a 36% tariff on Thai auto and electronics exports—a move that could slash GDP growth to 1.5% and cost $7 billion annually. Auto Alliance.BK, a major auto parts exporter, faces existential risks unless production relocations occur.

4. “Friend Shoring” and Tech Plays

The government's push for U.S.-backed investments in EVs and AI could unlock upside. Semiconductor firm HANA.BK, a supplier to Apple and Samsung, could thrive if tariffs are reduced.

Shinawatra's Policy Lifelines

Despite the chaos, Shinawatra has unveiled reforms to stabilize the economy:
- A 110-billion-baht stimulus package aims to boost GDP by 0.4–0.5%.
- A Digital Wallet initiative will distribute $280 in digital currency to 50 million citizens.
- Virtual banks (led by Charoen Pokphand and Gulf Development) are set to launch, modernizing Thailand's financial system.

Investment Strategy: Navigating the Crossroads

1. Avoid: Cyclical sectors like tourism and automotive until political clarity emerges post-July.
2. Overweight: Defensive stocks (CPALL, SCB) and infrastructure plays (Italian-Thai Development, tied to government projects).
3. Monitor: The U.S. tariff decision and Shinawatra's coalition survival. A negotiated 10% tariff could lift automotive and electronics stocks, while a government collapse might trigger snap elections or military intervention.

Long-Term Considerations

• Valuations: The SET Index trades at a P/E of 11 and dividend yields above 4%, offering value if stability returns.
• Structural Reforms: Digitization, education upgrades, and foreign investment incentives could lay the groundwork for long-term growth.

Final Verdict

Thailand's equity markets are at a crossroads. Shinawatra's political survival, the outcome of U.S. tariff talks, and coalition stability will determine whether the country pivots toward recovery or deeper turmoil. Investors should prioritize defensive assets, maintain liquidity, and wait for decisive signals before committing to riskier bets. The Thai economy is far from dead—but its equity markets won't rebound until the political storm clears.

Stay vigilant, and keep one eye on the SET Index. The path forward remains fraught with uncertainty—but the rewards for those who navigate it wisely could be substantial.