[SINGAPORE, BANGKOK] An ambitious campaign to revive Thailand’s battered stock market is falling flat, as entrenched pessimism about the economy accelerates a foreign funds exodus.
Seven months after US$4.5 billion was newly injected into the Vayupak Fund, analysts have been left perplexed by how little it’s helped the benchmark SET Index. The stock gauge has tumbled more than 16 per cent this year, making it the world’s worst performer among 92 indexes tracked by Bloomberg. Over the past 12 months, foreigners pulled out US$4.2 billion, the most across South-east Asia.
At the heart of weak investor sentiment is a lack of confidence that policymakers will be able spur the economy beyond tourism, as well as deep-rooted concerns about high household debt, political uncertainties and corporate scandals. US President Donald Trump’s tariff war is adding to the headwinds as a stronger US dollar has forced investors to flee from emerging markets.
“Most people realise our equities are trading at very cheap valuations, but it’s very hard to convince them to invest in stocks now with poor sentiment and a weak economic outlook,” said Narongsak Plodmechai, chief executive officer at SCB Asset Management. The government has “demonstrated its serious intention to rescue the stock market, but there should be more urgent steps to support the market”, he said.
The faltering rescue plan – which aims to revive the stock market by investing into local firms – is offering policymakers and investors a warning about the ability of state-run investment funds to spur markets. What Thailand’s government does next will determine its status among market peers.
When authorities announced fundraising for Vayupak last August, analysts lauded the news, with Goldman Sachs upgrading Thai stocks on expectations it would help attract foreign capital. Political instability and poor corporate earnings had roiled Thailand’s markets for much of 2024, and officials pinned their hopes on a stock market renaissance on the fund.
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The market rallied for a while before the challenges set in. Government data showed that Thailand’s household debt pile remained stubbornly high. Economic growth was also coming in below most forecasts, with 2024 marking the slowest growth rate among its South-east Asia peers. Consumption and manufacturing sectors were also showing signs of slowing.
In November, Goldman downgraded Thai stocks, citing poor economic growth and high valuations. “With the supportive equity market boost from the Vayupak fund fading, Thailand’s less favourable fundamentals are back in view,” they said in a note.
At least 50 to 60 per cent of Vayupak’s US$4.5 billion funds have been deployed, according to Macquarie analyst estimates. The benchmark SET Index is down nearly 10 per cent since the new fundraising.
Investors say that hopes for a turnaround lie with Prime Minister Paetongtarn Shinawatra’s young government to take more forceful measures to revive the economy. That would include creating a more business-friendly environment and stronger regulatory reforms.
Earlier this month, Thailand announced a US$4.4 billion cash handout plan to stimulate growth, and has called for a weaker currency to support tourism and exports. It also ramped up infrastructure investments and proposed legalising casinos. Last week, it announced tax incentives for investments into the market.
Still, “sentiment is so weak that those measures could not resist the global situation”, said Chavinda Hanratanakool, chief executive officer of Krung Thai Asset Management Pcl which co-manages the Vayupak Fund. “We just hope that the government’s serious attempts to boost economic growth will succeed. That will be the most important driver for Thai equities.”
Thailand is not the only emerging market in Asia to get hit. Stocks and currencies in Indonesia and India have also been heavily sold off due to the US dollar strength. Still, Thailand’s 2025 stock market tumble is at least double its peers as analysts point to more investors losing faith in the economic outlook.
“We continue to see foreign outflows as there are no clear catalysts that Thailand will overcome its structural challenges,” according to Kaushal Ladha, head of research Thailand for Macquarie Capital, adding that “there has been a general lack of conviction in buying” by domestic funds too. BLOOMBERG
