Prayut Chan-o-cha was officially endorsed as prime minister by His Majesty the King on Tuesday. This came six days after Gen Prayut won 500 out of the 749 votes available in a joint sitting of both houses of parliament, including all 249 from the appointed Senate (whose speaker abstained by tradition).
Gen Prayut has said that the new cabinet will be formed soon, though the National Council for Peace and Order (NCPO) will remain in power until after the Asean Summit, hosted by Thailand, concludes on June 23.
These developments, coupled with recent reports that the Palang Pracharath (PPRP), Democrat and Bhumjaithai parties have finally reached an agreement on cabinet seat allocation, should quash lingering concerns in the market that the pro-military coalition will be unable to form a government.
Because Gen Prayut is about to take the helm of an elected government, he will no longer be able to use the all-powerful Section 44 of the interim constitution to resolve political and bureaucratic deadlocks, something he has done dozens of times since he took power in the 2014 coup.
We believe that the coalition partners should be satisfied with their respective cabinet seat allocations and will work together to carry out their election campaign promises, such as stimulating domestic consumption and improving the welfare of various groups in society.
While we're waiting for negotiations to finish, we highlight the key campaign promises made by the three main coalition parties before the March 24 election.
Once the government has been formed, we expect each party to utilise the ministries under its control to pursue respective political agendas. These include a minimum wage increase and personal income tax reduction as promised by the PPRP. The Democrat Party will likely pursue crop-price insurance, welfare programmes and measures to boost domestic rubber consumption. Bhumjaithai, meanwhile, campaigned heavily on promoting medicinal marijuana cultivation as a new revenue stream for farmers and legalising app-based ride-hailing businesses such as Grab.
We expect that these policies will take effect by the first quarter of 2020, though some could potentially be implemented in the fourth quarter of this year, depending on budget justification. This move should be positive for the domestic consumption outlook for the next 12 months.
We maintain our view that the government will likely pursue a large-scale fiscal stimulus programme to prop up the economy, which is currently being affected by volatility in the global macro environment. Consequently, our top picks consist of stocks in the commerce, telecom, banks and contractor/construction materials sectors. These include: CPALL, BJC, ROBINS, INTUCH, TRUE, CK, STEC, SCC, BBL, KBANK and TMB.
Our year-end SET target is 1,750 points.
