Thailand, Japan Prepare for Elections | Insight with Haslinda Amin 2/6/2026

Key Concepts

• Global Market Volatility: Tech sell-offs, particularly driven by AI-related concerns, are impacting global markets, leading to a reassessment of the “AI trade” and a shift towards hardware manufacturers.
• Political Uncertainty: Thailand’s upcoming election and Japan’s lower house vote present significant political uncertainties with potential implications for economic policy.
• AI Disruption & Opportunity: AI poses both a threat and an opportunity for the Indian IT sector, requiring adaptation and investment in new capabilities.
• India’s Economic Outlook: India’s economy is showing positive signs with upward revisions to GDP forecasts, but faces challenges in attracting foreign investment.

Global Market Dynamics & AI Trade Recalibration

Asian stocks initially mirrored a US tech sell-off triggered by Amazon’s $200 billion capital expenditure plan and concerns about AI disrupting software companies. However, recovery was observed with retail investor buying, particularly in Korea and Taiwan. The market is undergoing a recalibration of the “AI trade,” shifting focus from software to hardware manufacturers positioned to benefit from increased AI spending. Citi upgraded its KOSPI target to 7000, reflecting this shift. While gold and silver initially stabilized, they haven’t functioned as reliable safe havens due to widespread volatility. US Treasuries are seen as a volatile alternative. Chinese stocks are considered relatively attractive, having underperformed last year and benefiting from government support. ARC uses a five-year forecast approach with conservative multiple compression assumptions to assess AI investments.

Thailand’s Political Landscape & Economic Challenges

Thailand is holding its third election in seven years amidst its slowest economic growth in a decade. The election is a two-way race between the conservative establishment (backed by the military following recent border clashes with Cambodia, leveraging nationalistic sentiment) and the progressive People’s Party. The outcome is uncertain, with the potential for a coalition government and concerns about policy paralysis. Thailand’s political history is marked by cyclical instability, including military coups (2006, 2014) and judicial interventions. A concurrent national referendum will determine whether to replace the 2017 military-backed constitution, which critics argue weakens political parties. Thailand also has the highest income inequality among Asia-Pacific countries (World Bank).

Japan’s Political Outlook & Economic Considerations

Japan is heading to the polls with polls suggesting a comfortable win for Prime Minister Sanae Takaichi, allowing her to pursue higher defense spending and a large supplemental budget. However, concerns remain about Japan’s long-term demographic challenges and fiscal path. The election marks a shift in political dynamics with the end of a long-term coalition and the formation of a new party, introducing some uncertainty. Japan is becoming more assertive economically.

India’s Economic Performance & Investment Climate

The Reserve Bank of India (RBI) held its key rate at 5.25%, contrary to consensus expectations of a 25 basis point cut, potentially indicating confidence or a desire for flexibility. The RBI revised its GDP forecast upwards to 6.9% for Q1 and 7% for Q2, with inflation projections at 2.1% for FY26. The US-India trade deal is expected to boost exports, particularly for textiles, benefiting small and mid-cap companies. Despite this positive outlook, India has experienced significant foreign portfolio outflows ($19 million last year, $3 million this year) as investors seek opportunities in other markets, particularly the tech sector. India’s equity market is currently fairly valued with projected earnings growth of 12%. The Indian budget is considered pragmatic.

AI’s Impact on the Indian IT Sector

AI poses both a threat and an opportunity for India’s software and IT services industries. Routine jobs are likely to be automated, but new opportunities will emerge in areas like data management, data security, platform development, and AI implementation. Indian IT companies are expected to benefit from the infrastructure and data center growth associated with AI. Partnerships between software and AI companies are likely, with Indian companies potentially focusing on deploying AI solutions and providing compliance services. The key for Indian IT companies is to adapt, invest in AI capabilities, and focus on areas where human expertise remains critical. The emergence of LLMs (Large Language Models) and GCCs (Global Capability Centers) are key trends.

Conclusion

The global market is navigating a period of volatility driven by reassessments of the AI trade and geopolitical factors. Thailand and Japan face critical elections with potentially significant implications for their respective economies and political stability. India presents a promising economic outlook, but must address challenges in attracting foreign investment and adapt to the disruptive potential of AI within its vital IT sector. Successful navigation of these challenges will require strategic adaptation, investment in emerging technologies, and a focus on long-term structural reforms.