BANGKOK: For years, Thai equities stood tall as one of South-East Asia’s largest stock markets. That bullish story is fast unravelling, and not even cheap valuations can save the day.

The nation is set to lose its longstanding No. 2 spot in market capitalisation to rivals Singapore and Malaysia, according to data compiled by Bloomberg.

The gap between Thailand and Singapore is about US$14bil versus US$125bil a year ago. Thailand’s precipitous drop is the result of a combination of political and legal flip-flops, weaker-than-expected tourism spending and allegations of corporate misconduct.

Those factors have spurred a 14% sell-off in the benchmark Stock Exchange of Thailand Index over the last 12 months, the biggest fall among major benchmarks globally.

“The market is likely to remain a value trap until the economic and corporate earnings growth outlook improves,” said Alan Richardson, a fund manager at Samsung Asset Management Co.

The total value of companies traded on Thailand exchanges was about US$440bil through last Thursday, a small lead compared to US$426bil for Singapore and US$422bil for Malaysia, the data showed.

Indonesia’s stock market, valued at about US$749bil, has been the region’s largest the vast majority of the time since late 2021.

Things weren’t supposed to be this way. When Thailand finally relaxed its pandemic-era restrictions back in late 2022, investors assumed that the influx of tourists would revive its ailing economy.

Instead, China’s draconian Covid restrictions and a weak macro economy resulted in fewer travelers from the country - who made up more than one-quarter of total visitors in 2019 - and less spending.

Political instability related to whether Prime Minister Srettha Thavisin will be removed from office and policy delays including a yet-to-be-paid US$14bil cash handout are weighing on market sentiment.

To revive market confidence, Thailand’s bourse has launched a series of new initiatives, including reforms, to prevent any market abuses and improve efficiency, according to exchange president Pakorn Peetathawatchai.

Global traders aren’t yet convinced. Overseas investors have offloaded nearly US$3.3bil worth of stocks so far this year, according to Bloomberg data.

 - Bloomberg