Stocks drop most in 8 months; baht falls

Thai stocks sank the most in eight months and the baht dropped after an explosion in Bangkok killed at least 20 people and put the nation’s tourism industry at risk.

The benchmark SET Index fell 2.56% at the end of trading session to close at 1,372.61 points, down 36.13 points.

SET50 index dropped 2.79%, or 25.63 points, to 894.25 in trade worth 56.40 billion baht.

The MAI index sank 3.15%, or 18.60 points, to 572.60, in total transaction value of 2.08 billion baht.

Local individuals bought a net 17.70 billion baht, followed by brokers (1.24 billion). Local institutions sold 12.03 billion baht, followed by foreigners (6.91 billion).

Year-to-date, foreign investors sold a combined 59.39 billion baht, followed by brokers (9.26 billion). 

A gauge of tourism stocks slumped the most on record, while transport-related companies declined more than 5%. The baht weakened 0.7% to 35.611 per dollar, approaching its lowest level since April 2009.

Monday’s night-time explosion in Bangkok’s central shopping district was the first major attack in the capital since the military seized power last year. Hospital officials are treating 124 people for injuries, many of whom are foreigners, according to the Emergency Medical Institute of Thailand. Tourism accounts for 10% of the nation’s economy, which slowed last quarter amid weak local demand and exports.

The blast will “definitely have a negative impact on equities, the currency and the overall economy,” said Andrew Stotz, chief executive officer of Bangkok-based A. Stotz Investment Research and former head of research for Thailand at CLSA Ltd. “Thailand is vulnerable right now, as economic growth and corporate earnings are weak.”

Erawan Group Plc, which operates malls and luxury hotels in Bangkok, tumbled 8.2%, heading for the biggest drop since June 2013. Airports of Thailand Plc, the nation’s biggest airport operator, and Thai Airways International Pcl sank more than 6%.

SET president Kesara Manchusree dismissed concerns about the SET index, saying the negative market response would be temporary as Thai stocks had good fundamentals.

She said foreigners held around 32% of the shares in the Thai stock market, on par with to the average levels over the past 10 years of between 32-35%. The average daily trading value of around 50 billion a day was also at the medium level.

Ms Kesara said the SET already had in place measures to handle the situation based on the principle that trading should not be interrupted to ensure fairness to all investors. At the same time, the regulator urged investors to closely monitor the situation and made decisions based on the companies’ fundamentals. 

Tourists killed

The blast during rush hour left body parts scattered on Ratchaprasong intersection, which is surrounded by malls, hotels and the Erawan Hindu shrine frequented by tourists and locals. The dead included Chinese and Filipino visitors. The military government blamed people seeking to destroy the tourist-reliant economy and said security officials have identified suspects behind the attack.

UBS Group AG said that while the event won’t have a long- lasting impact on the economy or investor sentiment, rising non-performing loans and slowing growth make the nation’s stocks unappealing.

“We are underweight in Thailand and see no incentive to revisit the market,” said Adrian Zuercher, the Hong Kong-based head of Asia asset allocation at UBS. “Growth is extremely weak, undershooting expectation by a wide margin, and there is no real sign of improvement. We are in particular concerned about the jump in NPLs.”

The finance ministry in July cut forecasts for exports and gross domestic product growth for a third time this year. A factory output index has dropped every month but one since March 2013, while exports have declined each month this year.

Interest rates

The baht has fallen 7.7% in 2015 as foreigners pulled a net US$1.5 billion from the country’s equities amid concerns over the military government’s ability to deliver on pledges to revive economic growth. Prospects of higher US interest rates and slumping commodity prices have also spurred a rout in emerging-market currencies and stocks.

“This tragic news just adds to the poor fundamentals of Thailand,” said Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong. “There were many issues tied to the Thai baht” before this happened, Ms Trinh said, adding that she’s sticking with an underweight call on the currency.

BBL Asset Management Co said it will buy shares if they fall too much, given the country’s favourable longer-term outlook.

“If prices of stocks in which we have confidence drop so much, we will step in and accumulate them,” said Voravan Tarapoom, Bangkok-based chief executive officer at BBL Asset Management. “The fundamentals of most listed companies remain sound.”