Thai shares plunged below the psychological 1,500-point level at one time and the baht weakened Monday as investors retreated to safe-haven assets on mounting worries over Greece's potential debt default and possible exit from the euro zone after European partners refused to extend a credit lifeline.
Bonds, usually seen as a hedge against risk, barely changed.
At the session's end, the decline in Thai shares was smaller than that of most Asian peers. The Nikkei 225 tumbled 2.88%, the Hang Seng plunged 2.61%, and the Shanghai Composite sank 3.29%.
The Stock Exchange of Thailand (SET) index began the day with a sharp fall and headed further south to the day's trough of 1,495.86 points before bargain hunting in the last trading hour helped the market to creep back above the 1,500 threshold by the close.
The main gauge fell by 6.84 points or 0.45% to 1,511.19 in moderate turnover worth 39.3 billion baht.
Retail investors were the biggest net sellers yesterday, with a net position of 2.33 billion baht, while brokers cashed 324 million out of the market.
On the buying front, institutional investors bought 2.2 billion baht, while foreign investors poured 452 million into the Thai stock market.
The baht briefly slipped to 33.90 to the US dollar in early trade before the euro's partial bounce-back helped the Thai currency pare some of its loss to stand at 33.82 to the greenback in afternoon trade. It had been quoted at 33.79/33.81 last Friday.
Greece's aid talk took a twist over the weekend when the country's European partners were shocked and angered by the announcement that Athens would next Sunday hold a referendum on austerity.
Without new bailout funds, Greece is on course to miss a €1.6-billion (60.2 billion baht) repayment to the International Monetary Fund (IMF) due today. To tackle capital outflows and deposit runs triggered by panic from the potential debt default, Greece imposed capital controls and shut banks for six days.
Asia Plus Securities strategist Prakit Siriwattanages said the Greek crisis triggered panic selling, but buying on the dip helped to limit the SET's loss.
"Greece will remain a major factor in creating a highly volatile stock market this week," he said.
But Trinity Securities research manager Nattachat Mekmasin said Greece would have only a minimal effect on Thailand since both countries had low economic activity.
The Finance Ministry's Fiscal Policy Office sought to soothe investor jitters, saying Thai exports to Greece were a mere 0.2% of the total and Greece's debt had changed hands from financial institutions to the IMF and the European Central Bank.
Greece's economic value represents 2% of the regional bloc, while the euro zone accounts for 8% of Thailand's exports.
Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association, said bond prices rose slightly in subdued trade of 30 billion baht — well below the 40 billion typical of recent weeks.
"Greece's debt crisis does not directly affect the Thai bond market," she said. "The crisis has little chance of spilling over as long as the euro zone still injects cash into money markets via quantitative easing."
Tak Bunnag, head of global markets at Bank of Ayudhya, said while financial markets still expected Greece to remain in the currency bloc and accept creditors' bailout conditions, there would be capital outflows from emerging-market economies if Greek citizens opted to refuse the imposed bailout package.
"Thailand would experience capital outflows since it is one of the emerging markets, and capital would flow to safe-haven currencies or assets such as the dollar, the yen or the Swiss franc," he said.
Darren Buckley, president of the American Chamber of Commerce in Thailand, said it would be "interesting" to see what unfolds over the next week but called the direct impact on Thailand "muted" at this stage.
He said the impact should remain minimal unless broader issues emerged such as a Greek exit from the euro zone.
The short-term effect will be volatility in bond yields, currencies and exports, Mr Buckley added.