Thailand stocks have rallied sharply this year, an impressive feat given May's military coup, but despite high hopes for the new administration's policies, analysts don't expect shares to rise much further.
"The easy money looks to be already behind us," Nomura said in a report Tuesday.
The SET index is up more than 17 percent so far this year, and up more than 8 percent since mid-May, when Thailand's army chief General Prayuth Chan-ocha declared the military had seized power in a coup that followed more than six months of political protests. On Tuesday, the index ended down 1.1 percent.
"The domestic stock market has taken a positive stance towards a clearer political outlook and the junta's short-term economic policies," Nomura said. "The market has almost priced in the optimistic outlook. The honeymoon period is almost over and reality will hit soon."
Nomura expects the first phase of the junta's reforms is done, with a second phase of implementation and execution about to begin.
"The country is poised for an uphill battle with regards to political, economic, social, and education reform. Historically, such changes often take a long time before results are seen," it said. "If the reforms turn out to be another wasteful process like the coup in 2006, which brought further conflicts, we believe the SET could retreat from its current high levels."
There are other concerns about the sustainability of the rally. Valuations are increasingly demanding, Nomura noted, with the market already trading at 14.0 times forward earnings, even as consensus earnings estimates are facing cuts.
The country's high household debt levels could also begin to constrain domestic consumption and not all of the new policies are positive for stocks, such as the decision to delay bidding for 4G telecom contracts, the bank said.