(July 17): Thai stocks are finding favour again as investors bet that an Anutin Charnvirakul-led government will bring an end to years of political turbulence, spurring foreign capital inflows.

The country’s benchmark stock index has surged 30% this year, outperforming all of its Southeast Asian peers. That marks a sharp reversal for a market that ranked as Asia’s worst performer in 2025 before the February general election handed Anutin’s party a decisive win — the biggest for any conservative Thai group in over two decades.

The shifting investment sentiment has already caught the attention of some of the biggest names on Wall Street. JPMorgan Asset Management is recommending that investors stick with Thailand, while a recent Bank of America survey revealed that fund managers are becoming less underweight on the Southeast Asian nation.

“I would recommend investors to stay in Thailand,” said Tai Hui, chief market strategist for Asia Pacific at JPMorgan Asset Management in Hong Kong. “It’s come out of a very difficult situation into a much smoother environment.”

The market bounce may embolden Anutin — who already enjoys a high degree of establishment support — to pursue a more ambitious economic agenda to lift growth from the meagre 2% average Thailand has logged over the past decade. That optimism is already spurring a re-rating of Thai assets among strategists, who bet the country’s increasing exposure to the global artificial intelligence supply chain and a resurgence in foreign direct investment will further boost capital inflows.

Anutin has touted Thailand’s improved investment climate and policy predictability to attract foreign capital. This contrasts with once-favourite emerging market Indonesia, where investors are concerned about uncertainty surrounding President Prabowo Subianto’s economic policies and the potential for a downgrade to frontier market status.

Foreign investors have pumped in almost a net US$2 billion (RM8.16 billion) into Thai equities this year, and another US$1.26 billion into the nation’s bonds. The inflows contrast with nearly US$13 billion they pulled over the previous three years from stocks, a period during which Thailand saw three prime ministers take office and growth averaged less than 3%. 

Adding to Thai assets’ appeal is a better-than-expected export performance and steady tourist arrivals — both also helped by a weakening baht. There’s also greater coordination between the government and the central bank in cushioning the economy from the Middle East conflict.  

Thailand is also seen as a beneficiary of some of the portfolio investments exiting Indonesia. Global investors have pulled about US$4.5 billion from Indonesian equities this year as stocks sank and the rupiah tumbled to a record low.  

“The election held in February has led to the emergence of the view that a stable government can be expected for the time being, and it has become a recipient of funds flowing out from Indonesia and the Philippines,” said Hironori Akizawa, a fund manager at Tokio Marine Asset Management.

But to sustain the peer-beating stock rally, Thai companies need to back it up with earnings growth, JPMorgan Asset Management’s Hui said. 

Earnings-per-share forecasts for the SET Index have risen 7% since Anutin’s election victory, while estimates for the MSCI Asean index have fallen by 1.9%.  

Still, the rally faces risks from a combination of global headwinds, sluggish domestic growth, tourism’s uncertain outlook and the impact of a strong El Niño. 

“We are not getting hyper-excited because the broader economic growth of Thailand in the medium to long term is still nothing to shout about despite growth in some areas,” said Xin-Yao Ng, a fund manager at Aberdeen. 

Much of the rally in the SET index this year has come from the 76% surge in shares of Delta Electronics (Thailand) Pcl, which make up nearly a fifth of the benchmark. The stock trades at more than 100 times 12-month forward earnings as investors view the maker of power systems for data centres as a play on the AI supply chain. 

“We are overweight the IT sector in Thailand due to the scarcity value and fundamental upside from robust AI-related capex,” said Zhikai Chen, Head of Asia & Global Emerging Market Equities at BNP Paribas. 

Thailand’s macroeconomic landscape is also improving as the Anutin administration speeds up FDI approvals, streamlines investment rules and cracks down market misconduct. Foreign investment approvals surged 73% in the first five months of the year to about 154 billion baht (US$4.6 billion or RM18.69 billion) from a year earlier, official data show.

“The market is actually catching up after investors had an overly pessimistic view of the outlook last year,” Maybank economist Erica Tay said.

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