The Investor Confidence Index (ICI) for the next three months dropped to the "neutral" territory for the first time in eight months due to rising concerns about the prolonged pandemic.
However, investors expected capital inflows in the second half of the year after a recovery in listed companies' profits and a weakening of the US dollar.
Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco), said the FETCO ICI in June, which anticipated market conditions over the next three months, is at 106.05, down 16.1% from the previous month due to the pandemic.
According to the survey, the most supportive factor is the vaccine distribution expected to help ease the pandemic situation, followed by the prospect of fund inflows and economic recovery.
However, the worsening pandemic situation, followed by international conflicts and the country's economic retreat, are the top three headwinds.
However, despite the overall drop, the confidence of institutional investors remains in the "bullish" zone while that of the others dropped to "neutral".
The most attractive sector is healthcare services while the least attractive sector is fashion.
The Thai stock market has currently become more volatile due to uncertainty over the vaccine rollout. The rising number of confirmed cases and death rates, as well as partial lockdown in Bangkok and adjacent areas in the red zone, have also intensified the tension, piling pressure on Thailand's public health sector.
In addition, the Monetary Policy Committee has downgraded the forecast for GDP in 2021 and 2022 to 1.8% and 3.9%, respectively, following tarnished sentiment.
Uncertainties revolving around the vaccine procurement and rollout have greatly undermined foreign investors' confidence as it is yet to be decided whether Thailand can reopen within 120 days as planned.
The start of the Phuket sandbox in July and the government's measures to aid those impacted by the pandemic will also be factors that will affect future sentiment.
However, the positive factor to attract fund inflows is listed companies' prospective growth of net profits. In the first quarter, listed firms reported a total net profit of 257 billion baht, 229.8% higher than the same period last year. Total profits are expected to increase 56% for the whole of 2021 and rise by 15% next year.
Mr Paiboon said analysts forecast the SET Index will reach 1,800 points next year thanks to the economic recovery and reopening to international tourists in other areas besides Phuket.