Thai stocks fell by 2.3% yesterday on worries about the European debt crisis, weak Chinese economic data and growing domestic political risk.

The Stock Exchange of Thailand index fell by 26.31 points to close at 1,115.19 in trade worth 22.99 billion baht. Banks fell by 3.6%, energy stocks by 2.2% and information and communications technology shares by 0.5%.

Sentiment was poor throughout the session after an announcement that China's purchasing managers' index fell to its lowest reading this year.

Germany manufacturing data showed the fastest pace of contraction in nearly three years, while further weakness in the euro on concerns about Spain's banking sector also hurt sentiment.

With Spanish sovereign debt yields jumping to an unsustainable level of nearly 7% earlier this week, concerns have arisen that the European debt crisis could soon erupt out of control.

Chaos in the Thai parliament over plans by the government to push for a "reconciliation" bill and calls for new street protests by the yellow-shirt People's Alliance for Democracy also weakened market sentiment.

Thawatchai Assawapornchai, an analyst at Globlex Securities, cautioned the index could fall further next week on domestic and external pressures.

Asia Plus Securities recommends investors raise their cash holdings to 60% and limit equity investment to solid blue-chip names like Kasikornbank (KBANK).

Among most-active stocks, PTT Global Chemical (PTTGC) fell by 1.8% to 53.25 baht, Bangkok Bank (BBL) by 4.4% to 172 baht and Asia Aviation (AAV), which debuted on the market Thursday,by 10.8% to 3.30 baht. AAV, operator of the budget carrier Thai AirAsia, launched its initial public offering at 3.70 baht.