Thailand’s stock market is edging dangerously close to a critical point, underscoring the urgent need to restore investor confidence and market liquidity, notes the chief of the Investment Analysts Association (IAA), calling for swift and decisive support from the government.

Paiboon Nalinthrangkurn, IAA chairman and a board member of the Stock Exchange of Thailand (SET), said the Thai bourse risks losing its ability to function as an effective engine for capital formation and wealth creation.

In a post on his Facebook page, Mr Paiboon said Thailand’s equity market may no longer be able to serve its traditional role in mobilising capital and supporting long-term wealth creation.

"If the problems are not addressed seriously and promptly, the consequences could extend beyond the capital market and threaten the long-term sustainability of Thailand’s economic system," he said.

The SET ranked among the world’s worst performers in 2025, when only six stock markets globally posted negative returns. The Thai index fell by 10% last year, contrasting starkly with a 21% gain in global equity markets.

Last year marked the third consecutive year of losses for Thai equities, with a cumulative decline of 24% over three years, equivalent to a market capitalisation loss of around 4.25 trillion baht.

Over the same three-year period, global markets enjoyed a "golden era" of investing, supported by widespread monetary easing.

The global equity index delivered a cumulative return of about 60%, highlighting the opportunity cost borne by Thai investors, said Mr Paiboon.

Trading liquidity has shrunk by 54% compared with four years ago, pushing the market closer to a point where large foreign institutional funds may find it effectively non-investable due to liquidity constraints, he said.

"Perhaps the most alarming signal is the collapse in initial public offering [IPO] activity," said Mr Paiboon, noting funds raised through IPOs have plunged by 93% from 136 billion baht five years ago to just 9 billion last year.

"In simple terms, the SET is approaching a danger zone where it may no longer be able to perform its core economic functions effectively. This comes at a time when Thailand faces major challenges in restructuring the economy and building new growth engines. Such projects typically carry higher risks and cannot rely solely on bank lending. They require a strong and functioning capital market as a primary source of funding."

While the Thai stock market still has hope, he said it was unlikely to recover on its own without strong and credible government support.

"Stock indices reflect confidence and future expectations, and with weak growth, falling earnings, capital outflows, and low investor confidence, the market lacks the momentum to rebound independently," said Mr Paiboon.

He urged the new government to act on two priorities. First, restore confidence in both the stock market and the real economy through credible, achievable policies that address structural issues, invest in future industries, and signal Thailand’s ability to return to sustainable growth of around 4% a year, with the capital market playing a central role.

The other recommendation is reviving liquidity, starting with domestic investors, as liquidity has declined due to foreign selling and capital outflows.

Confidence alone is insufficient without clear incentives, Mr Paiboon said, adding that measures such as a well-designed Thai Individual Savings Account and tax incentives for repatriating overseas investments could quickly lift liquidity, even at the cost of short-term tax revenue, by generating long-term wealth effects and stronger economic growth.

The SET must also address retail investors’ concerns over fairness, particularly high-frequency trading and short selling rules, through greater transparency, proactive communication, and enforceable regulations to rebuild trust in the market, he said.