The investor confidence index (ICI) remained in neutral territory last month as uncertainty over a new government and announcements on implementing the financial transaction tax undermined sentiment, says the Federation of Thai Capital Market Organizations (Fetco).
The July ICI, which anticipates market conditions over the next three months, was 83.5, up 2.2% from the previous month, hovering in the neutral zone, said Fetco chairman Kobsak Pootrakool.
Conducted from July 20-31, the survey found investors are most concerned about the establishment of the new government, followed by the announcement on the financial transaction tax implementation and international conflicts.
The confidence of foreign investors is in the bearish zone, while that of retail, broker and institutional investors is neutral, he said.
"The survey found only foreign investor confidence is down, falling 33.3% to 66.7, while for other investors sentiment is up," said Mr Kobsak.
"Retail investor confidence rose 42.7% to 93.9, and that of proprietary and institutional investors jumped 125% and 16.7% to 113 and 100, respectively."
The Stock Exchange of Thailand (SET) index fluctuated throughout last month, hit by uncertainty surrounding the government formation, a delay in choosing a prime minister and continued selling by foreigners.
Sentiment was dampened as Thailand's 2023 GDP forecast was reduced to 3.5% from a previous forecast of 3.6% in April, as a result of lower revenue generated from the tourism sector, he said.
Moreover, exports contracted for a sixth consecutive month.
At the end of July, the SET index closed at 1,556 points, up 3.5% from a month earlier, with daily trading value averaging 46 billion baht.
Foreign investors continued their sell-off for a sixth straight month, cashing out 12.6 billion baht in July and a total of 118 billion for the first seven months.
The survey found tourism and leisure the most attractive sector, while the least attractive to investors is banking. The most influential factor driving the Thai stock market is the formation of a new government after the May elections.
External factors to monitor include the Federal Reserve's monetary policy, as investors anticipate the US central bank is still far from turning dovish with a growing US economy that may trigger further inflation.
China's economic slowdown, which hurts Thailand's exports and tourism, is also on the watchlist.
Domestically, the main issue is the selection of the prime minister and government formation. Any further delay may affect economic growth and the fiscal 2024 budget.
"Unfavourable sentiment also hinges on political conflicts, which may lead to unrest, slowing exports as a result of a stronger baht and the sluggish economies of trading partners that are trying to weather inflationary pressure and high interest rates," said Mr Kobsak.
He said the sagging confidence may be further dented by slower than expected tourism growth.