Thai shares suffered a sharp sell-off yesterday, tracking a sudden Wall Street slump to slip below the 1,500-point barrier before late buying helped to rally the stock market.
An upbeat second-quarter US GDP stoked speculation the Federal Reserve could raise interest rates sooner than expected, and concerns over euro-zone deflation risk knocked down bourses across the world. Argentina's second debt default in 13 years also weighed on market sentiment.
The Stock Exchange of Thailand (SET) index started on a negative note, falling below 1,500 points shortly after trading started and reaching a trough of 1,487.4 points before regaining most of the early losses to close at 1,500.2 points, down by 0.15%, in brisk trade worth 44.2 billion baht.
Thai shares were among small losers in Asian markets, with the Philippine Stock Exchange bucking the trend.
Foreign investors yanked 468 million baht out of the Thai stock market yesterday. Institutional investors and brokers had net sales of 1.12 billion and 744 million baht, respectively, while retail investors were net buyers of 2.34 billion baht. Despite the SET retreat, analysts kept their positive view for medium-term investment.
Pichai Lertsupongkit, a senior vice-president of Thanachart Securities, admitted the market was worried the Fed would start its normalisation sooner than expected after US economic growth advanced at a seasonally adjusted annual rate of 4% in the second quarter. The euro-zone deflation risk is another concern, meaning the bloc's economic recovery could be slow, leading to stimulus packages in the near future.
The last negative factor is Argentina’s debt default, which could affect Brazil, its third-largest trader, Mr Pichai said. If the contagion infects Brazil, it could spill over to other emerging markets in Latin America, but Asean members still have little trade and financial exposure to Argentina.
The market correction for the US and other developed countries is not a surprise, as their share prices are considered pricey, said Mr Pichai.
He said the SET had strong support in the near term at 1,490 points with resistance at 1,520. Its target is 1,630 points over the next 12 months in the wake of 7% growth in SET-listed companies' earnings before doubling to 14% next year.
But the SET could reach 1,750 if politics remain stable and policies are implemented smoothly. The banking, building and construction, and property sectors are expected to reap benefits from the economic momentum.
Somchai Anektaweepon, head of research at Finansia Syrus Securities, said speculative buying on corporate earnings and interim dividend payments helped the SET to pare some losses.
"We continue to believe the SET will eventually stabilise and rebound and so recommend accumulating on weakness and holding for a new rally," he said. Funds continued to flow into regional bourses but could reverse soon amid worries over Portuguese and Argentinian woes.