Can Anutin revive Thailand’s flagging stock market?

Thailand’s stock market has long been seen as cheap, but the discount has deepened into something structural. This year, the SET index trades near 1.1 times book value, the lowest in decades, compared with close to two times for regional peer Vietnam and more than 2.3 times for Indonesia.

Dividend yields topping 4% might suggest an opportunity, yet investors remain unconvinced, judging by one of the world’s worst-performing stock markets so far this year. The problem goes beyond politics or cyclical sentiment. Balance sheet stress and weak shareholder returns are among the factors weighing down Thailand’s performance.

The rise of new Prime Minister Anutin Charnvirakul has prompted fresh questions about whether a new administration can reset waning investor confidence. For now, markets remain cautious on initial expectations that his government might last only four months before the dissolution of parliament and new elections.

However, a Constitutional Court ruling on September 10 clarified that two referendums are required for constitutional reforms and thus raised the possibility that his tenure could last longer, giving his government more time to implement policies.

Those will apparently include quick-win measures such as the khon la krueng (“half-half”) capped co-payment program that sees the government pick up half the tab for meals and other basic consumption.

Such schemes may lift household consumption in the short run, but investors will see them as populist stopgaps. They may steady sentiment temporarily, yet market confidence will ultimately hinge on whether the administration signals credible fiscal discipline, stronger governance and a commitment to capital market reforms.

Balance sheets under pressure

Our review of non-financial large caps — together representing roughly 60% of the SET’s market capitalization — highlights persistent structural pressures. Thai corporates are not nearly as cash-rich as headline dividend yields imply.

Cash is concentrated in a handful of energy and utilities players, which together hold more than 60% of the aggregated cash pile across SET-50 non-financial firms. Only around one-sixth of the large caps are in net cash positions.

Among the largest companies with market capitalizations above 100 billion baht, the median debt-to-equity ratio sits near 0.9 times. For Thai mid-caps in the 50–100 billion baht range, leverage rises closer to 1.2 times. Debt levels equal roughly four years of operating earnings, leaving limited cushion against a downturn.

Working capital strains add to the picture. Since 2022, large caps have seen their cash conversion cycle lengthen by nine days, while mid-caps have improved only marginally. Property developers across both tiers face particularly severe constraints. Strained working capital translates into weaker operating cash flow.

Shareholder returns that erode trust

Shareholder return policy has also weakened confidence. Share buybacks — a mainstream global practice for compensating investors — remain rare. Dividends are the default tool, but according to our analysis, payouts have often outpaced profit growth or cash generation.

Large caps have managed to sustain dividends through modest earnings recovery and balance sheet repair. Mid-caps, however, are still paying out despite shrinking cash reserves and weaker profitability — a mismatch that undermines confidence when reserves are poorly deployed rather than invested for long-term value.

The result is that higher dividend yields no longer translate into higher valuations. Instead, they reinforce a sense of fragility: companies appear to be distributing what they cannot afford, without demonstrating productive reinvestment opportunities ahead.

Macro headwinds and regional contrasts

Macro headwinds compound the discount. Portfolio investors have pulled back from Thai equities and bonds since the pandemic, even as foreign direct investment into ASEAN has remained resilient. The SET has borne the brunt of this divergence, becoming the region’s worst performer.

Global allocators benchmark against US Treasuries yielding 4–5%, not Thai government bonds with yields of around 3%. In that comparison, Thailand’s equity yield premium looks less attractive, particularly once currency risk is taken into account.

The baht has proven more resilient than many expected, but FX is not the decisive issue. What matters more is whether Thai corporates can demonstrate sustainable balance sheets and credible capital discipline.

Divergences within the Thai market underscore both challenges and opportunities. The overall SET trades at about one times book value, while the SET-50 hovers closer to 1.9 times.

The gap reflects pressure concentrated in smaller companies, many of which face weaker financials, and highlights why the market-level discount is deeper than headline multiples suggest.

Unless reforms take root, capital will continue flowing to more dynamic ASEAN markets such as Vietnam, which has reform-driven momentum, and Indonesia, where higher growth expectations and favorable demographics continue to underpin investor optimism.

What must change

Closing Thailand’s valuation gap will require action at both corporate and policy levels:

• Stronger capital discipline. Boards must align dividends with genuine cash generation. Debt maturities should be extended and selective divestments considered. Buybacks, if used sparingly, would signal recognition of undervaluation and offer investors greater tax efficiency than dividends.
• Credible investor communication. Companies need to engage more clearly with capital markets. Transparent financial targets on leverage, coverage ratios and return on invested capital, supported by regular updates, would build confidence among investors.
• Supportive policy frameworks. Regulators and the exchange can foster a healthier market by promoting buyback frameworks consistent with global best practice, encouraging disclosure standards closer to advanced markets, and promoting investor education. Coordinated action across government, the stock exchange and investment banks could help channel capital into productive growth rather than perpetuate short-term fragility.

A discount of trust

Thailand’s discount is partly deserved: deteriorating balance sheets and undisciplined payouts justify a lower valuation multiple. But it is also exaggerated by misconceptions caused by ineffective communication with capital markets, which further depresses confidence.

A new government may offer some stability, and if the Anutin administration lasts longer than expected, it could provide a window to reassure markets. Yet whether short or extended, the burden falls squarely on corporates and regulators.

Without stronger balance sheets, disciplined payouts, credible investor engagement and supportive policy, Thailand will stay undervalued — not for lack of potential, but for lack of trust.

Dai Kadomae, CFA, CPA, is a Thailand-based strategic finance adviser and ex-CFO, with prior experience at Citi, EY and Nomura, specializing in cross-border M&A and capital markets.