Global investors shun Thailand as election overhang hits assets

Published Wed, Feb 4, 2026 · 12:16 PM

[SYDNEY] Thailand’s inability to revive its economy has left its stocks and bonds in an unenviable position: cheap, unloved and increasingly irrelevant.

Some of the world’s biggest money managers say this weekend’s general election is prompting them to keep exposure limited, as the outcome will only compound existing challenges like elevated household debt and weak growth. Those pressures helped make Thai stocks among the worst performers globally last year and its bonds trailing most emerging market peers in 2026.

The sentiment reflects little confidence that the country’s fourth leader in three years will deliver the reforms needed to reverse weak governance and policy drift. As a result, the yield curve may steepen further, driven by interest rate cuts and government spending expectations, while equities stay depressed as capital flows elsewhere, investors say.

“Thailand does look cheap in terms of valuations,” said Christopher Leow, chief investment officer at Principal Asset Management in Singapore. “But looking cheap is probably not enough.”

Among investors, T Rowe Price Group says that it has scaled back bond holdings ahead of elections and remains cautious on local currency debt, with the firm watching for the direction of policy before they add to their positions. Allianz Global Investors says its allocation is broadly underweight, but would consider shifting positions into the longer end of the yield curve.

Aberdeen says that it favours defence stocks and exporters that limit exposure to the Thai economy, adding that policy execution could be uneven if the vote results in a fragile coalition government.

“For lasting investor confidence, the election is only the starting point,” said Nattanont Arunyakananda, an investment manager at Aberdeen in Bangkok, adding the outlook hinges on credible reforms and fiscal and monetary support. “Without reforms that lift productivity and improve investment climate, any post-election bounce is likely to remain tactical rather than structural.”

Over the past three elections, the benchmark Stock Exchange of Thailand Index has gained an average of 3.3 per cent in the one-month period following a vote.

The worries are reviving debate over the role of Thai assets in international portfolios. Long favoured for their exposure to global growth and diversification benefits, the nation’s assets have fallen out of favour amid a sluggish economy, weak tourism and recurring political unrest.

One concern is the expected pickup in debt issuance to fund financial relief promised by leading political parties as the central bank forecasts economic growth of just 2.2 per cent in 2025, trailing regional peers. The government has already approved a US$1.4 billion food and services subsidy programme, and additional pledges have helped push the gap between the nation’s two- and 10-year bond yields to the widest since October 2023.

“We will be looking for them to invest into unleashing the potential of the economy,” said Leonard Kwan, a portfolio manager at T Rowe Price in Hong Kong. Thailand has some capacity to spend but the key question is effectiveness in how they utilise it, he added.

Even so, some signs of value are emerging. Thai stocks trade at around 14 times forward earnings, which is below the five-year average and a gauge of regional peers. A steepening yield curve may also offer opportunities at the long end, with higher fiscal spending expectations becoming priced in.

BlackRock holds less exposure compared to a year ago, but has recently started buying more bonds with longer maturities, according to Navin Saigal, Asia-Pacific head of fundamental fixed income in Singapore.

Investors are watching whether meaningful reforms will follow the vote or be watered down, as government formation often forces compromise. The constant churn of political leadership is also dimming hopes for lasting change, with early post-election market rallies often fizzling out.

“With no clear majority for any single party in sight, it’s hard to envisage a sharp turn in investor confidence,” said Wai Kiat Soh, a portfolio manager at Ninety One in Singapore. “The ‘muddle-through’ scenario will likely play out once again.” BLOOMBERG