2019 Elections - Part 1. Thailand: Magic Moment for Democracy’s Return?
After nearly five years of rule and multiple false starts, the military junta has announced an election that paves the way for a return to democracy (under a new constitution). Although the rules of the game favor the military, do not count out the pro-Thaksin PTP opposition party from a strong showing. Above all else, markets would like to see a smooth election process and uncontested results. Still, even in the case of a dispute, Thailand’s strong sovereign balance sheet suggests a relatively muted reaction in risk assets unless violence erupts and poses harm to domestic confidence and the tourism industry.
This insight is Part 1 of a six-part series on 2019 elections in which we evaluate key polls and their potential to re-shape the economic outlook and investment risk profiles. These six markets - Thailand, Indonesia, India, South Africa, Greece and Argentina - collectively represent one-quarter of the world’s population and more than $5 trillion in GDP. We review distinct domestic challenges as well as campaign pledges by incumbents (and their challengers) aimed at addressing them. We also humbly assign probabilities to baseline and alternative scenarios and their implications for macroeconomic outlook and investments.
Even amidst their diversity, these six jurisdictions display some remarkable similarities: subdued economic momentum, bouts of market volatility, signs of voter disquiet and/or disillusionment and an opposition looking to capitalize on all of these forces. In a bid to revive the ‘magic’ that had helped to install their administrations, many incumbent governments are now on the defence - either changing tack (and dialing back past policies) or attempting to convince voters to let their policies work their magic.
Summary - Election timeline, political risk classification and market implications:
Election date (2019) | Degree of uncertainty | Baseline scenario (%) | Market implications | Market view | |
Thailand | 24 March | Medium to High | Elections are held and pro-junta PP keeps control (65%) | Medium to Low | THB: Stable unless political uncertainty erodes confidence, tourism ThaiGB: Stable CDS: Gradually wider SET: Energy, materials and capital goods favoured. More upside in non-bank financials vs financials. |
Indonesia | 17 April | Low | Jokowi re-elected, PDIP coalition intact (75%) | Medium | IDR/IndoGB: Constructive INDON: Stable JCI: prefer energy, materials, services, capital goods, transportation,and telco.Cautious on main banks. |
India | April to May | High | BJP/NDA retain power, with smaller majority (60%) | High | INR/IGB: Steeper curve (bearish long-end) CDS: Wider on potential negative sovereign outlook Nifty: Cautious healthcare and banks. Overweight IT. |
South Africa | 7-31 May | Medium to High | ANC retains power (80%) | High | ZAR/SAGB: Constructive SOAF: Constructive JSE Top40: Constructive on Financials. Cautious on consumer. |
Greece | 20 October | Medium to High | ND returns to power (52%) | Medium to High | GGBs/CDS: Scope to tighten vs periphery peers AEX: Banks may revive though European credit markets need to be watched. Energy, Infra, and utilities offer opportunity. Gaming too. |
Argentina | 27 October | High | Cambiemos retains power (52%) | High | ARS/Argtes: Peso richly valued but slower inflation positive for Argtes ARGENT: Volatile Merval: Volatile. Optically cheap valuations signify risk and weak growth. Hydrocarbons could be a winner. Cautious on consumer. |
Historical 5yr CDS (Argentina and Greece = LHS, all others RHS):
Historical equity indices (rebased where 1 Jan-2018 = 100):
Please refer to other insights in this series:
- Elections 2019 - Part 1. Thailand: Magic Moment for Democracy’s Return?
- Elections 2019 - Part 2. Indonesia: Jokowi’s Policies - Magic Bullet or Bitter Pill?
- Elections 2019 - Part 3. India: Modi’s Magic Touch Fades as Populism Makes a Comeback
- Elections 2019 - Part 4. South Africa: Ramaphosa - ANC’s Magician?
- Elections 2019 - Part 5. Greece: New Democracy Promises Magic Makeover
- Elections 2019 - Part 6. Argentina: Macri Magic and the Peronist Spell
This series is co-authored by Paul Hollingworth at Creative Portfolios and Virgil Fernandes Esguerra.
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