Investors Fear Uncertainty After Thai Election

The one thing foreign investors fear the most is uncertainty. While many
Thai citizens wanted a return to democracy, the military brought about a
period of stability. The fear of uncertainty was no longer there when it
came to politics was no longer there. Thailand was open for business.
In the NY Times, former Thai Prime Minister Thaksin Shinawatra
criticized the military’s handling of the economy since the 2014 coup.
However, the facts present a different story. Since the military seized
power, the Thai Baht has strengthened against both the US Dollar and
the Euro. Since the beginning of 2016, the SET is up 32%.

In the eyes of foreigners, the military brought stability after years of
fighting between the Red Shirts and the Yellow Shirts. Fears of unrest
dissipated and Thailand was open to investment again. Fast forward to
today, and the only thing on investor’s minds is more uncertainty.
After this weekend’s elections, here is what we know. It is unlikely that
any party will win a clear majority and potential friction between political
parties and the military could lead to economic activity being significantly
disrupted, which would see GDP growth lower than forecast. The
transition to a democratically elected government most likely will not be
smooth.
Thailand's 'democratic front' is claiming a majority in House of
Representatives but short of numbers to elect Prime Minister. As a
result, even if Prayuth returns as Prime Minister, he will face a divided
House of Representatives and legislation will be increasingly difficult to
enact. With government gridlock, many projects will stall and GDP
growth will slow.
Some foreigners are now actively betting against Thai stocks.
MonacoTrader on Twitter said:
Trade Idea: Short Swing-Thailand ETF- $THD -Thailand economy is
struggling lately & the latest fiasco about election results don't help it
either. I expect to see more turbulence in the next few weeks. New
taxations will be announced for income tax and property & construction.

MonacoTrader is a successful UK investor who has a history of making
smart bets. Going short the Thailand ETF (THD) is one way foreigners
can get exposure to Thailand going long or short. The ETF has US$500
million in assets and trades about US$12 million daily. Since February,
the ETF is down 6%.

Right now, the election has created uncertainty in Thailand. Foreigners
have already started pulling their money and some, like MonacoTrader,
are now actively betting against Thai stocks. Right now, the best bet for
Thai investors is to play good defense. Conserve cash and wait for the
uncertainty to clear and look to buy bargains on any selloff. While there
isn’t blood in the streets, great fortunes have been made buying when
everyone else is selling.