The Yes vote for a new constitution could lift sentiment in the Thai capital market as it is a big step in ensuring a general election in the second half of 2017, indicating the return of democracy, say analysts and traders.
"It is positive and the stock market could jump at the opening bell on Monday. It is likely the SET index will reach 1,600 points at the end of this year as fund inflows to the Thai market will be intensified," said Teerawut Kanniphakul, senior vice-president of CIMB Securities (Thailand).
The Thai stock market has had a wild ride recently, dipping below 1,500 points last week before clawing back some early losses. The SET index has surged 18% this year.
Foreign investors, who have been net sellers from the Thai stock market the past two years, have bought 81.56 billion baht more than they sold this year.
The Bank of Thailand reported earlier US$3 billion worth of capital has flooded the Thai bond market this year.
Mr Teerawut said a Yes result will help the SET index test the tough resistance range of 1,540-1,545 points, with the market starting an upward trend if it can firmly stand above the level.
But Kavee Chukitkasem, assistant managing director of Kasikorn Securities, is more cautious, saying a Yes outcome will bolster stock market sentiment but the upside gain will be limited.
"The impact on the bourse will be short-lived as a Yes vote boosts foreign investors' confidence that a general election is coming. But the SET's prospects in the medium- and long-term are determined by fundamentals," he said.
Nuttachart Mekmasin, Trinity Securities' research manager, echoed Mr Kavee's view, saying the vote will only have a psychological effect on the stock market.
Offshore fund flows will move in line with external factors rather than internal ones, he said.
The SET index is expected to hover in a range of 1,470-1,550 points in the near term, said Mr Nuttachart. He said his house recommends buying on weakness and selling on strength.
Sentiment in the third quarter is expected to be better than the final three months as risks from the US presidential election and the Fed's potential rate hike cast a dark cloud over Thai shares at that time, said Mr Nuttachart.
It is likely the US central bank will resume its policy rate hikes in December, which could be a turning point in the US dollar's strengthening and capital outflows from emerging markets, he said.
"The market has already anticipated a Yes vote. The stock market could go either way after the vote. A decline could be attributed to sales on fact," said Win Phromphaet, chief investment officer at CIMB Principal Asset Management.
He recommended investors diversify their investment portfolio by snapping up overseas assets, which are not resilient to external factors.
Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association, said a Yes outcome could attract a marginal increase in capital inflows to the Thai bond market.
"The Yes vote signals a general election is on track. Some foreign investors have paid attention to the poll as they are required to invest in markets that have full democracy," she said.
Foreign investors stretched their buying spree in Thai bonds, with over 100 billion baht coming in from January to July based on their expectation the Fed will keep its policy rate unchanged for a while, Mrs Ariya said.
Most capital inflows are into short-dated debt instruments, but there are signs foreign investors are diversifying more money into long-term bonds, she said.
Tak Bunnag, head of the global markets group at Bank of Ayudhya (BAY), said the Yes vote would not give a big boost to the baht as offshore fund inflows depend largely on the policy rate movement of advanced economies such as the US.
Following the Yes vote, the baht should stick to BAY's estimated range of 35-36 versus the greenback in the second half, he said.
