Thailand's Stock Market Struggles Despite Rescue Efforts

Thailand’s ambitious efforts to revive its struggling stock market are falling short, as deep-rooted economic pessimism accelerates a massive exodus of foreign funds. Despite the injection of $4.5 billion into the Vayupak Fund seven months ago, the SET Index has plunged by over 16% this year, making it the worst-performing index globally among 92 tracked. Over the past year, foreign investors have pulled out a staggering $4.2 billion—more than any other Southeast Asian market.

At the core of this continued weakness is a lack of confidence in the government’s ability to spur economic growth beyond the tourism sector. Investors remain deeply concerned about high household debt, political instability, corporate scandals, and broader uncertainties. Moreover, the ongoing U.S.-China trade war and a stronger dollar are driving investors away from emerging markets like Thailand.

“Despite the fact that Thai equities are trading at extremely cheap valuations, convincing people to invest in them is a hard sell given the poor sentiment and bleak economic outlook,” said Narongsak Plodmechai, CEO of SCB Asset Management. He added that while the government has demonstrated a commitment to rescuing the stock market, more immediate actions are needed to restore investor confidence.

The faltering Vayupak Fund rescue plan, which aims to stimulate the stock market by investing in local companies, is raising questions about the effectiveness of state-run investment initiatives. The government’s next move will be crucial in determining its standing among global market peers.

When the Vayupak Fund was launched last August, analysts had initially praised the initiative, with Goldman Sachs upgrading Thai stocks on expectations that it would attract foreign capital. Political instability and lackluster corporate earnings had already rattled Thailand’s markets throughout 2024, leading officials to place their hopes for a market rebound on the fund.

However, the rally was short-lived as economic challenges intensified. Government data revealed that Thailand’s household debt remained persistently high, and economic growth fell short of expectations, marking 2024 as the slowest growth rate in Southeast Asia. Additionally, sectors like consumption and manufacturing showed signs of slowing.

In November, Goldman Sachs downgraded Thai stocks, citing continued economic weakness and inflated valuations. “With the Vayupak Fund’s boost to the equity market fading, Thailand’s underlying economic fundamentals are once again taking center stage,” the firm stated in a report.

Analysts estimate that at least 50% to 60% of the Vayupak Fund’s $4.5 billion has been deployed, yet the SET Index has fallen nearly 10% since the fund’s introduction.

Investor hopes for a turnaround now rest on Prime Minister Paetongtarn Shinawatra’s government, which is expected to implement more aggressive economic reforms to create a business-friendly environment. This includes stronger regulatory measures and tax incentives designed to revive investor sentiment.

In early March, the Thai government introduced a $4.4 billion cash handout plan to stimulate economic growth, alongside efforts to devalue the baht to support tourism and exports. Additionally, infrastructure investments have been ramped up, and a proposal to legalize casinos has gained traction.

Despite these measures, the economic outlook remains weak, with many investors skeptical about their effectiveness. “Sentiment is so weak that these initiatives couldn’t offset the global challenges,” said Chavinda Hanratanakool, CEO of Krung Thai Asset Management, which co-manages the Vayupak Fund. “We are hoping that the government’s serious attempts to stimulate growth will succeed, as that is what will drive Thai equities forward.”

Thailand’s stock market struggles are part of a wider trend affecting emerging markets across Asia. Countries like Indonesia and India have also seen heavy sell-offs in both stocks and currencies due to the stronger U.S. dollar. However, analysts note that Thailand’s 2025 market decline is at least double that of its regional peers, reflecting a deeper loss of confidence in the country’s economic future.

Kaushal Ladha, head of research for Thailand at Macquarie Capital, explained, “We continue to see foreign outflows as there are no clear signs that Thailand will overcome its structural challenges. There is also a general lack of conviction in buying, even among domestic funds.”

As the global economic landscape shifts, Thailand’s policymakers will need to take decisive and effective steps to restore investor confidence and stabilize the market.