Thailand’s benchmark stock index headed for its biggest loss in 11 months as energy companies slumped on a rout in crude and investors speculated this year’s rally was excessive relative to earnings prospects.
As of 3.22pm, the SET Index plunged 7.18% to 1,406.00, the most since Oct 2011. PTT Exploration & Production Pcl (PTTEP) dropped for a seventh straight day, while its parent PTT Pcl (PTT), Thailand’s biggest energy company, tumbled 3%. The two stocks represent about 10% of the SET Index by weighting.
“Thai stocks have been hit by foreign selling as investors pull out from emerging markets,” said Mixo Das, an Asia ex-Japan equity strategist at Nomura Holdings Inc. in Singapore. “A large listed oil-and-gas sector and expensive valuations relative to history are adding more pressure.”
Brent crude traded near US$60 a barrel in London after the United Arab Emirates said OPEC will refrain from cutting output even if prices slumped to as low as $40. PTT, PTT Exploration and PTT Global Chemical Pcl account for a quarter of the SET’s 124 point decline in the five days. The SET Index (SET) is still up 13% this year and trades at 2.1 times net assets, compared with 1.4 times for the MSCI Emerging Markets Index.
The head of the Thai bourse said no measures were needed to shore up stocks and investors shouldn’t panic.
“We will need to monitor the market closely, but I don’t think we need any measures yet,” Kesara Manchusree, president of the Stock Exchange of Thailand, told reporters today in Bangkok. “I believe most companies will benefit from lower oil prices. This should also help the economy to grow without inflationary pressure next year.”
Emerging outflows
The selloff came as some investors who had bought stocks on margin are being forced to unwind positions, said Teerawut Kanniphakul, the Bangkok-based deputy head of retail research at CIMB Securities (Thailand) Co.
Investors withdrew more than $2.5 billion from US exchange-traded funds that buy emerging-market stocks and bonds last week, the biggest outflow since January, according to data compiled by Bloomberg. The MSCI Emerging Markets Index dropped 0.5% today in a seventh day of declines.