(Bloomberg) -- A market revival for Thailand just isn’t coming. 

The nation’s first election since 2019 was supposed to be the catalyst to drive economic growth and bring back foreign investors. Instead, the benchmark stock index is set for its fifth quarterly decline, foreign funds are selling, and the baht is the second worst-performing currency in Asia.

“Thai stocks will have to wait for a clear rebound in corporate earnings to spur any big rally,” said Narongsak Plodmechai, chief executive officer of SCB Asset Management Co., which oversees about $50 billion of assets. “It’s very unlikely to see earnings growth gaining momentum” given the sluggish economy, he said.

The slowing growth — both in the economy and corporate earnings — means Thailand is becoming the least attractive market in Southeast Asia. Analysts have cut corporate earnings estimate to a two-year low, data compiled by Bloomberg show, while a much-touted fiscal stimulus has been delayed.

Bualuang Securities Pcl, a unit of Bangkok Bank, expects the benchmark equity index to hover in the range of 1,320 to 1,450 points in the second quarter, around the current level.

Foreign funds sold a net $5.5 billion of Thai stocks in 2023, the most since 2020. While more than half of the $1.9 billion exodus this year was due to the transfer of assets controlled by the Charoen family for estate planning, the outflows were already the biggest in Asia before that, according to data compiled by Bloomberg.

“Thai stocks have lost their charm for some time even with domestic investors,” said Jessada Sookdhis, chief executive officer of Finnomena Co., which manages about $1 billion of assets. “The outflows of foreign funds will further weaken the sentiment on Thai stocks because any major rally is unlikely without the buying of international investors.”

Corporate earnings dropped 11% last year, data from the stock exchange showed. The decline was mostly triggered by poor demand from consumers struggling with high household debt, according to Kitpon Praipaisarnkit, a strategist at UOB Kay Hian Securities Thailand Pcl.

The fortunes of Thai Credit Bank Pcl is telling of the broader economic malaise. The lender, which is focused on small businesses including food stall owners, has fallen 10% from its initial public offering price since its debut last month. Meanwhile, leading retailer Central Retail Corp. has slid 12% this year, while Bangkok Bank fell 11%. 

Prime Minister Srettha Thavisin has been calling for a rate cut, as manufacturing production fell for a 16th month. Bank of Thailand Governor Sethaput Suthiwartnarueput has said that was no panacea for the economy’s structural problems, and kept the policy rate unchanged in the February meeting. 

Investors are siding with the BOT, with global funds selling $612.5 million worth of bonds in March, suggesting they don’t expect a reduction from the 2.5% rate. That’s a fourth straight month of net outflows. 

“BOT has remained split on a rate cut possibility which has meant a less favorable environment for Thai bonds,” said Aditya Sharma, a strategist at Natwest Markets. 

Meanwhile, analysts at Goldman Sachs Group Inc. said there is significant scope for the baht to underperform against its peers. Thai exports have lagged competitors as the country isn’t part of the high-tech semiconductor supply chain, they said. 

The nation’s Election Commission submitted a petition in March to disband the nation’s largest opposition party for breaching a charter over efforts to amend the royal defamation law.

The case “is likely to be the most important event to monitor, as it could prompt street protests,” Nomura Holdings Inc. economists, including Charnon Boonnuch and Euben Paracuelles wrote in a note earlier this month. Move Forward Party was the most popular one based on last year’s election results, they added.

That may disrupt the economy further. The government expects annual growth of 2.2%-3.2% this year.

“The key reason why Thailand is underperforming versus peers ultimately is because of weak macroeconomic growth outlook in the short term,” said Tanawat Ruenbanterng, an analyst at Tisco Securities Co. “The market also is disappointed by the lack of government stimulus measures.”

--With assistance from Ishika Mookerjee, Hooyeon Kim, Marcus Wong and Lee Miller.

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