Capital outflows bring deep-red to Thai bourse

Capital outflows bring deep-red to Thai bourse

The biggest plunge in the Stock Exchange of Thailand for more than two years is in line with regional trends and improvements in the US economy resulting in a stronger dollar, regulators and analysts said.

The Thai stock market opened with a drop of 16 points Tuesday and continued sliding in the morning session to reach 1,4760.05 points before rebounding slightly to close at 1,477.07 points at lunch.

The Thai index then in the afternoon session swung into the red zone, at one point dropping 80.94 points lower than Monday's close. The index finally closed at 1,452.6.63, down 75.92 points or 4.97%, with a trade value of 64.93 billion baht.

The fall was the largest seen since October 2011. The gauge has lost 12% since reaching its highest level since 1994 on May 21, exceeding the 10% level that some investors define as a correction. 

The baht weakened to an eight-month low and government bonds declined, according to Bloomberg News.

Foreign investors have shifted their portfolios from TIP countries - Thailand, Indonesia and Philippines - to other markets with cheaper stocks, according to Visit Ongpipatkul, president of Trinity Securities Co.

He said the TIP markets are no longer interesting compared to bourses in North Asia, such as Hong Kong, South Korea and China, so there are likely to be continuing portfolio adjustments to reflect that, according to a report in Info Quest.

Mr Visit said that the market in Hong Kong also dropped, but at a lower rate than the TIP bourses.

Thai central bank governor Prasarn Trairatvorakul and Stock Exchange of Thailand (SET) president Charumporn Chotikasatien agreed that the heavy plunge of the main index on Tuesday was caused by foreign capital out flow.

They said foreign funds flew out to the US as the overall outlook of the US economy is improving after Standard & Poor's Ratings Services adjusted the potential credit rating of the US to stable from negative, strengthening the US dollar.

Mr Prasarn said such improvement has drawn funds back to the US as investors anticipate an improving economic situation there.

He said there are some fund outflows from Thailand at the moment, following a strong inflow earlier, and the private sector should be more mindful of the exchange rate.

Poranee Thongyen, an executive vice-president of Asia Plus Securities, said investors are taking profits from the Thai stock market, which has briefly rebounded. The market will continue its volatile movement this month, she said.

She anticipated continuous selling by foreign investors until the end of June. Ms Poranee expected total net sales by foreign investors to reach 60 billion baht at the end of June.

Mr Charamporn said the decline in the SET index was in line with other capital markets in the Asian region, including the Philippines and Indonesia, in response to the capital outflow back to the US.

The SET president said he had closely monitored the situation with the Stock Exchange Commission (SEC) and suggested investors also closely watch the situation as capital outflows would affect the stock market.

Foreign capital also flew out from the bonds market, weakening the value of baht currency to 30.93 baht from 30.79 baht to the US dollar, he added.

Mr Charamporn insisted that the Stock Exchange of Thailand has not implemented any special measures to curb the decline in SET index for the moment.

The plunge in SET index was caused mainly by capital outflow, he said, but has not affected listed companies. Foreign investors have been selling since the beginning of the year, he noted.

Prin Kijjathornpitak, senior director at KTB (Thailand), agreed that the plunge in SET index this afternoon was in line with stock markets in Asia and Europe.

He said the plunge was the result of profit taking after the SET index had rebounded for two days.

The Bank of Thailand annoucement that it was preparing to lower its gross domestic product growth projection for 2013 from 5.1%, was also an internal negative factor that affected the stock market, he said.

According to a report by Bloomberg News, Asian stocks fell, led by Japanese shares, after the Bank of Japan kept its policy unchanged. Chinese stocks listed in Hong Kong headed for the longest losing streak in 17 years as a gauge of companies outside Japan fell more than 10 per cent from a high last month.

Emerging-market stocks tumbled to a nine-month low, led by the biggest declines in Philippine and Thai stocks since 2011, and currencies weakened amid concern the US Federal Reserve will reduce stimulus.

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