Panic gripped the local capital market with Thai shares dipping 1.13%, the baht making a sharp retreat and bonds under selling pressure after the army imposed martial law nationwide Tuesday.
Investors were clutching their heads - and stomachs - when the markets opened, but by the end of the day, the stock exchange and baht both recovered from the shock of the martial law declaration. (Photo by Thanarak Khunton)
The SET index slid 1.58% to 1,388.31, shortly after the opening bell, before buying on the dip, betting that the months-long political impasse will end soon, emerged and helped pare some of the early steep loss. The main gauge closed at 1,394.69 points with brisk turnover of 43.26 billion baht. Foreign investors pulled 8.34 billion baht out of Thai shares in a single day.
The baht weakened sharply to the day’s trough of 32.65 per dollar triggered by offshore investors’ selling spree in early trade before bouncing back to 32.53-32.55 on suspected intervention by the central bank and exporters’ selling the greenback, a dealer at a local bank said. The baht traded at 32.44-32.48 on Monday.
- Business reacts: Warm welcome for martial law
- Foreign reaction: Wait and see
The local bond market suffered the same fate as the stock market and the local currency with heavy sales volume spotted in early trade before subsiding in the afternoon after army chief Prayuth Chan-ocha insisted that the declaration of martial law was aimed at restoring order and was not a military coup.
Voravan Tarapoom, chairwoman of the Association of Investment Management Companies (AIMC), said martial law could have an adverse impact on foreign investment as some offshore funds are prohibited from putting money in countries that declare martial law.
The market’s volatility will continue, while sentiment hinges on political developments.
“Some investors who hold cash for a long time think that it is a buying opportunity, while others who fretted over the situation decided to unload shares,” she said.
Ms Voravan recommended long-term investors consider Thailand’s fundamentals rather than the current situation.
“Investors should evaluate carefully before making any trading decision and ask whether they’re speculators or long-term investors,” she said.
Therdsak Thaveetheeratham, executive vice-president at Asia Plus Securities, said market sentiment was clouded after martial law took effect before dawn on Tuesday.
The broker recommended investors shun tourism, air transportation and industrial estate stocks on expectations that their earnings could be weighed by the declaration, but continue their purchase of global plays.
“The military has tried to be a buffer between the two sides and reduce the possibility of clashes, but political problems will drag on. Investors then need to closely monitor how the new prime minister who will be neutral and acceptable to all parties will be picked,” said Mr Therdsak.
Bank of Thailand spokesperson Roong Mallikamas said the baht recouped some weakness after investors digested the situation.
Meanwhile bonds’ yield jumped slightly by 0.04-0.05% in the morning due to panic sales right after the market opened.
However, it bounced back to close at only 0.01%, said Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association.
