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Baht/$ 34.34/41 (Bid/Ask)
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14450
+350
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NUNTAWUN POLKUAMDEE
Thai shares nosedived 6.88% yesterday as markets across Asia ended deeply in the red on growing fears of a global economic recession. The Stock Exchange of Thailand closed at 492.34 points, down 36.37, in trade worth 17.46 billion baht. The index dropped to as low as 483.91 points before rebounding in late trade. The SET has not been below 500 for five years.
Energy stocks fell 7.05% as crude oil hovered around $87 per barrel, a 10- month low, while banks dropped 7.16%. Retail investors were net buyers of 2.3 billion baht, foreign investors were net sellers of 1.92 billion and institutional investors net sellers of 422 million.
Analysts said the global market environment, combined with the increase in local political risk, fuelled selling right from the opening yesterday.
Kasem Prunratanamala, head of research at CIMB-GK Securities, said investors would do well to stay out of the market, even at current low valuations.''We already have the Thai market underweighted. There just is no reason to invest in an uncertain environment that could worsen, even though several good stocks are very cheap,'' he said.
For the year to date, the SET index has fallen 38% in value and is now trading at eight times earnings and with a market yield of 5.55%.
Mr Kasem said the sharp dropoff in the Japanese and Indonesian markets yesterday reflected the fact that both had enjoyed stronger capital inflows when compared with Thailand over the past few years.
Tokyo's Nikkei index fell 9.4% in the biggest one-day drop in 21 years, while the Indonesia Stock Exchange halted trade after falling over 10%. Hong Kong fell over 8% and Taiwan and Seoul lost nearly 6% on investor fears that export earnings would drop sharply as the US and European economies slowed.
Mr Kasem said the global financial crisis was leading to panic sales and fund redemptions across the globe. ''Right now, we can't really predict where the index will go. There just are too many uncertainties,'' he said.
Sombat Narawutthichai, secretary-general of the Securities Analysts Association, said even back in 2004 foreign investors still had some 190 billion baht worth of net inflows in the Thai market.
Foreign investors this year have been net sellers of over 140 billion baht, due to domestic political risk as well as the need to raise cash to cover losses overseas.
Mr Sombat estimated 80% of selling by foreigners was due to global factors and the rest to domestic factors.
''Personally, I think that the best solution for politics would be to just dissolve Parliament and hold new elections. If that happened, then the anti-government [protests] would end,'' he said.
SET president Patareeya Benjapolchai said global investors were adopting a wait-and-see approach due to uncertainties about the global economy and the balance sheet of international banks.
Mrs Patareeya, speaking from a roadshow in Dubai, said Middle Eastern investors such as Dubai International Capital and the Islamic Bank of Dubai were interested in long-term direct investment in Thailand, including in the Islamic Bank of Thailand and new infrastructure megaprojects.
''Middle Eastern investors aren't that concerned about Thai politics, but rather how the global crisis will end,'' Mrs Patareeya said on the sidelines of a meeting of Asean finance ministers.
''Everyone is holding cash due to uncertainties about whether more European financial institutions could go bankrupt. But Thai companies have continued to grow since the 1997 economic crisis.''
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