SET plunges 5% as worry persists

Thai stocks plunged 5.3% yesterday in heavy trade as institutional and foreign investors dumped positions on continued concerns about domestic stability and the health of His Majesty the King.

The Stock Exchange of Thailand index fell by as much as 8% to a session low of 670.72 points before rebounding late on bargain hunting. The index closed at 692.72 points, down 38.75, in heavy trade worth 53.77 billion baht.

The decline came on top of a 2.04% retreat on Wednesday. Foreign investors, who were net sellers of 3.97 billion baht on Wednesday, were net sellers of 809 million yesterday, with local institutions net sellers of 3.12 billion and local investors net buyers of 3.93 billion. Energy stocks fell 5.05%, banks lost 6.39% and property dropped 6.46%. Losers outpaced gainers 429 to 27, with 32 stocks closing unchanged.

• See also: Royal Household Bureau reports King's health and appetite improve

SET president Patareeya Benjapolchai acknowledged the two-day sell-off stemmed in part from concerns about the 81-year-old monarch's health.

His Majesty was admitted to Siriraj Hospital on Sept 19 and is now undergoing treatment for a lung inflammation. Doctors said His Majesty is in good condition and is responding well to treatment.

Mrs Patareeya said portfolio adjustments by foreign investors were another factor behind this week's sell-off, and that a correction could be expected after the sharp run-up in share prices this year. The SET index since January had climbed by 62% as part of a global rally in stock markets on hopes that the worst of the recession has passed.

"The past several days have not been normal, and are being driven by short-term concerns and panic," she said. "Investors should monitor the news closely and sensibly."

Finance Minister Korn Chatikavanij agreed that stocks was poised for a correction following gains this year.

"As a result, sensitive news is having an impact on the market. The SET has a mechanism in place to deal with heavy volatility if necessary," he said.

The SET will temporarily halt trade if the index moves more than 10% from the previous day's close.

Mr Korn, a career investment banker before joining politics, said that Thai stocks remained undervalued when compared with other Asian markets.

SET chairman Sompol Kiatphaibool echoed the comments, saying a sell-off was to be expected given that this year's rapid increase in prices had come despite little change in the country's political or economic fundamentals.

"The market is clearly sensitive. For now, we see no unusual signs of market activity," he said.

Thirachai Phuvanatnaranubala, the secretary-general of the Securities and Exchange Commission, said foreign selling was the main factor driving down the market.

He urged investors to disregard unsubstantiated rumours, and noted that there had been no fundamental changes to justify the sharp correction.

In the futures market, investors were also paring back their positions in the wake of rising volatility. Volume for SET50 index futures on the Thailand Futures Exchange was 34,727 contracts yesterday with open interest of 19,906, compared with volume of 20,839 and open interest of 18,630 the day before. The December contract closed yesterday at 491.70, down 30.5.

Naruemol Art, head of equity derivatives at KGI Securities (Thailand), said short-selling trades remained low, with outstanding securities borrowing and lending (SBL) activity worth less than one billion baht.

The decline in SBL activity implies that the sell-off by foreign investors is an actual sell-off of their holdings, rather than pressure from added short positions, she said.

In other markets, the baht eased to 33.50/55 to the US dollar from 33.38/41 on Wednesday. Dealers said the currency weakened steadily throughout the afternoon in line with the decline in the equities market, reaching as low as 33.6 in intraday trade.

"Foreign investor confidence has been shaken on politics and other concerns," one dealer said.

In the bond market, turnover was normal at around 65 billion baht, with 45 billion driven by the central bank's auction of 14-day bonds. The yield curve moved upward by 1-5 basis points, with the five-year yield rising 5.57 basis points to 3.69489%.

Relate Search: Royal Household Bureau, Patareeya Benjapolchai, The Stock Exchange of Thailand index, Korn Chatikavanij