Thai Stocks Reverse Gains as Opposition Parties Secure Strong Majority in Election

According to a calculation made by Reuters based off data provided by the Election Commission, the Move Forward Party, led by Thai businessman Pita Lijaroenrat would be the party with the most seats. The Pheu Thai Party was second.

Separately Thailand's Gross Domestic Product for the first three months of 2018 grew by 2.7%% on an annual basis, exceeding expectations of a 2.3% increase.

Thai stocks briefly rose while the Thai Baht lost early gains on Monday after briefly touching a 3-month high. Investors await more concrete results of the Sunday general elections, as preliminary results show that pro-democracy party won a large majority.

The new Thai government will be formed by a coalition of parties, as neither opposition party has enough votes to form one.

Calculation by Reuters

Based on data from the country’s Election Commission, the Move Forward anti-military party led by Thai businessman Pita Limjaroenrat is expected to win the majority of seats. The Pheu Thai Party would be second.

If confirmed, it would be a resounding defeat for the pro-military party led by former Prime Minister Prayut Chao-cha and end nine years of military rule.

The official certification of results is expected to be finalized 60 days after polls close.

Set Composite Index opened Monday's trading session 0.3% higher before paring its gains. It closed the day 0.2% lower.

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Thai baht

The dollar rose 0.6% to 33.73 on Monday, the highest level since February of this year.

"We must remember that Thai politics has been very complicated over the years," Thitinan, Professor of Politics and International Relations at Chulalongkorn University, told CNBC Sri Jegarajah from Bangkok.

"The biggest winning party should have been able to form a government, but this is not the case." He added that there are three steps: winning the elections was the first step, then forming the government and finally becoming Prime Minister is the last.

The Pheu Thai Party has nominated Paetongtarn, the daughter of Thaksin's former Thai Prime Minister as its candidate for Prime Minister.

reported

Limjaroenrat has also "set his sights on becoming prime minister."

First quarter GDP

Separately Thailand's Gross Domestic Product for the first three months of 2018 grew by 2.7%% on an annual basis, exceeding expectations of a 2.3% increase.

Before the results of the elections,

Citi economist Nalin Chuchchotitham wrote on Sunday that Thailand's economy outlook will likely not change much in the coming months.

She said: "We expect the Q1 GDP to remain modest, but enough to signal the economy's bottoming out in Q4 of 2022. This would support BOT [Bank of Thailand] raising rates."

Thailand's central banks policy is currently at 1.75% and the next meeting will be on May 31. Citi anticipates that the Bank of Thailand will increase its benchmark interest rate another 25 basis points.

Chutchotitham expects that the new government will be confirmed by August, and the full fiscal budget for 2023 is expected to be announced in the last quarter of this year.

She wrote: "Over the medium term, economic outlook may see an increase in risks of populist policies that could raise questions about future fiscal discipline."

What's next?

Pongsudhirak said that there could be unrest if "there's a systematic distortion, subversion or manipulation of the result we saw yesterday", since the Sunday elections were a "profound, earth-shaking outcome for Thai politics in the last 20 years."

The Chulalongkorn University Professor said: "We've been stuck in this Thaksin-anti-Thaksin circle." The Thai people are now demanding change and reform after the Move Forward Party won yesterday's election.

He said that the Move Forward Party is "not like the Thaksin's party."

"First, it's not a Thaksin-aligned party. It has a different agenda. It isn't a populist per se." It is seeking institutional reforms in Thailand's traditional institutions - the military, monarchy, and judiciary. These are the causes of Thailand’s crisis over the past two decades.

Pongsudjirak stated that he would expect a more progressive, market-based economic policy from any Move Forward led government. This includes a pro-foreign-investment, anti-monopoly approach, more competition, and smaller-to-medium-sized businesses "getting a greater share of the deal."

Jihye Lee, a CNBC reporter, contributed to the report.