Investor confidence in Thailand’s capital market has sharply fallen into the bearish zone, according to the latest report from the Federation of Thai Capital Market Organizations (Fetco). The investor confidence index (ICI), which forecasts market conditions for the next three months, dropped to 66.1 in February, down from a neutral stance in January. This decline in sentiment is largely driven by external factors such as international conflicts, inflation, and the local economic slowdown.
Factors Affecting Investor Confidence in February
The February 2025 ICI revealed that confidence across different investor groups was affected by various global and domestic challenges. Retail investors, proprietary investors, and foreign investors all reported a drop in confidence, while institutional investors held a more neutral outlook. The ongoing international conflicts, particularly the trade war and geopolitical tensions, have significantly influenced the market sentiment.
Fetco Chairman Kobsak Pootrakool highlighted that these external pressures, alongside inflation concerns and a slowing Thai economy, are the primary contributors to the decrease in investor confidence. However, the government’s stimulus measures, fund inflows, and the Bank of Thailand’s policy rate cut were seen as positive factors helping mitigate the downturn.
Investor Confidence Breakdown: Retail vs Institutional Investors
The report showed significant declines in the confidence of retail investors, which fell by 37.9%, bringing the index to 50. Similarly, foreign investor confidence decreased by 33.3%, dropping to 66.7. On the other hand, proprietary investors saw a 25% rise in confidence, reaching 75, while institutional investors’ sentiment edged up by 3.8%, rising to 115.4.
These shifts highlight the differing impacts of market conditions on various investor groups. While retail and foreign investors are more sensitive to external factors, institutional investors appear more resilient in the face of uncertainty.
The Impact of External Factors on Investor Confidence
Several external factors have weighed heavily on investor confidence in Thailand. The most notable among them is the intensifying trade war, particularly with tariffs imposed by the United States on China, Mexico, and Canada. This has raised concerns about the global economy and its potential effects on Asian markets, including Thailand.
Furthermore, the MSCI stock portfolio adjustment, selling pressure from long-term equity fund redemptions, and disappointing earnings reports from listed companies have also contributed to the decline in the investor confidence index. Despite the Bank of Thailand’s rate cut by 25 basis points to 2%, which provided some positive sentiment, these factors have resulted in a significant drop in the SET index, which closed February down 8.4% at 1,203.72 points.
Looking Ahead: Factors to Monitor for Investor Confidence
Looking ahead, investors will need to closely monitor several key factors that could impact investor confidence. The ongoing trade war and the Russia-Ukraine ceasefire agreement remain critical areas to watch, as they could have ripple effects across global markets, including Thailand.
Locally, the government’s fiscal policies aimed at stimulating the economy and supporting the capital market will also play a key role in shaping investor confidence. As the situation develops, how these policies are implemented could either improve sentiment or exacerbate the challenges facing the market.
Conclusion: Investor Confidence and the Road Ahead
In conclusion, investor confidence in Thailand has been severely impacted by external factors, leading to a retreat into the bearish zone. While there are positive factors, such as government stimulus measures and a policy rate cut, the ongoing international conflicts and economic challenges are weighing heavily on market sentiment. Moving forward, both domestic and international factors will need to be closely watched to gauge the future direction of investor confidence and market conditions in Thailand.
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