Thai shares tumbled 1.78% Monday, rattled by the biggest one-day slump in Chinese shares in eight years and the worst Thai exports in three years and six months.
Securities analysts warned a further fall was likely, with support at 1,400 points.
The Stock Exchange of Thailand (SET) index started the week on a sour note, and the sell-off intensified in the late-morning session before the market closed at 1,412.55 points or a 25.53-point drop in brisk turnover of 40.3 billion baht.
Big-cap banking, telecommunications, energy and petrochemical stocks were at the centre of the sell-off.
Advanced Info Service dropped 1.63% to 242 baht, Kasikornbank lost 1.95% to 176 baht, True Corporation plummeted 4.46% to 10.70 baht, PTT was off 0.95% to 314 baht, TPI Polene slid 8.4% to 2.18 baht and Italian-Thai Development tumbled 5.96% to 7.10 baht.
Foreign investors cashed 1.5 billion baht out of the stock market Monday.
The main gauge extended losses for a 10th consecutive day, dipping 78.1 points or 5.24% from 1,490.65 points at the close on July 13, with 483 billion baht in market value being wiped out.
Falling confidence in the country's economic outlook in the second half, delays to infrastructure investment and concerns over weak listed companies' earnings and the US Federal Reserve's expected interest rate hike triggered the selling spree.
The Shanghai Composite index closed down 8.48%, the biggest loss since February 2007, at 3,725.56 points on worries the world's second-largest economy is heading for a sharp slowdown following downbeat manufacturing activity.
The rout in Chinese shares rattled other Asian bourses. Hong Kong's Hang Seng index slid 3.09%, the Jakarta Composite plunged 1.76%, the PSE Composite dipped 1.54% and Singapore's Straits Times index dived 1.17%.
Investors fretted over China's economic health after it reported dismal manufacturing data, said Thawatchai Asawapornchai, head of research at ASL Securities.
He said disappointing Thai exports last month and mounting worries over a US rate hike this week also weighed down the Thai stock market.
Thai exports tumbled for a sixth straight month in June, down by 7.87% year-on-year to US$18.2 billion, leading the first-half performance to fall by 4.84% to $107 billion. June's international shipments experienced the biggest fall since an 8.15% decrease in December 2011.
"Moreover, global oil prices are still falling, while investors lack confidence in Thailand's economic recovery in the second half after the government postponed auctions for the major portion of its infrastructure projects. There's no positive news now, so investors prefer holding cash," Mr Thawatchai said.
He said the Bank of Thailand's Monetary Policy Committee was expected to trim its policy rate by 25 basis points again for the third time this year at next month's meeting to prop up economic momentum.
Asia Plus Securities strategist Prakit Siriwattanages said the Thai stock market was now surrounded by a spate of negative factors.
The baht's pullback and the potential US rate reversal have also discouraged offshore funds from flowing back into the Thai stock market, he said.
Mr Prakit said the sell-off was expected to continue as new negative factors eroded investor confidence. The US policy rate call is investors' focus as they await a clue on the direction of interest rates.
Sukit Udomsirikul, managing director of Maybank Kim Eng Securities (Thailand), agrees with Mr Prakit that a further retreat by the SET index is expected after the main board slipped through the 1,450-point support line.
The market's price-to-earnings (P/E) ratio is 14-15, but some large- and medium-cap shares fell at a faster pace than the SET index.
Mr Sukit said the PE ratio of some banks fell to about 10, and all risks had already been priced in.
He recommends investors pile up bank, technology, energy and large property shares.
Meanwhile, the secondary bond market was muted.
Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association, said long-term bond yields were barely changed, while trading volume was stable at 65 billion baht.