Thailand: Why Shinawatra’s victory is good news

6th July 2011

King Fuei Lee, head of Asia equities at Schroders says: "We view the outcome of elections as a positive development for Thailand’s economy and its markets, and it should bring much-needed political stability to the country."

According to a report on Bloomberg Thailand's benchmark stock index could rise by 11 per cent by the end of the year as a result of Yingluck Shinawatra's victory.

The website quotes Petcharat Powattanasatien, who oversees about $23 billion of assets at Bangkok-based Kasikorn Asset Management, as saying the SET Index may climb to 1,200 by the end of this year, the highest since July 1996.

The Pheu Thai party, led by Thaksin's sister Yingluck Shinawatra, won 265 seats of a total 500 in the July 3 election; the party has already pledged to raise minimum wages, increase rice prices and accelerate the construction of mass transit systems to boost incomes and spur economic growth.

"Overseas investors will pour in more money into Thai equities following the large sell-off because the vote removed their fear about political instability," Petcharat is quoted as saying.

Schroder's Fuei Lee says the economic fundamentals of Thailand are strong, while Yingluck Shinawatra’s Pheu Thai party is expected to bring foreign investment back into the country.

"News of the decisiveness of the victory allayed market fears of a hung result and an ensuing political impasse. We view the outcome as a positive development for Thailand’s economy and its markets, and it should bring much-needed political stability to the country."

"The risk, however, remains that the Democrats and/or the military might stage a revolt. The likelihood of this occurring is, at present, very low in light of the Democrat Party leader Abhisit Vejjajiva conceding defeat and the army announcing that it had accepted the poll verdict and would not intervene.

"Away from the politics, we view the economic fundamentals of Thailand as strong, with growth driven by demographics and urbanisation.

Secular trends – including high agriculture prices, growth in provincial areas on infrastructure improvements, as well as a pick up in foreign direct investments – are at the core of the country’s long-term outlook.

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