Thailand's benchmark index tumbled 4% and headed for the steepest weekly slump since October 2008 on Friday.
Despite the plunge, SET still see as having long-term future. Bangkok Post file photo
In the morning session, the Stock Exchange of Thailand main index swung greatly. It was at 1,526.27 points shortly after the opening and fell to 1,467.72 before closing at 1.468.94 points.
The index sank for a fifth day, the largest decline among Asian benchmark gauges, on concern valuations are expensive and as foreign investors sold domestic equities. The measure has tumbled 8.1% this week.
It rose to the highest level since 1994 last week to trade at 14 times estimated 12-month earnings, the most since Bloomberg began tracking data in 2006.
"This is just a normal short-term consolidation because of the short-term overprice," Jessada Sookdhis, chief investment officer at CIMB-Principal Asset Management Co, which oversees about $1 billion of assets, said by phone from Bangkok. "The market is still on a good long-term uptrend."
SET president Charamporn Jotikasthira said the plunge in the Thai stock market was still not a concern. Investors were taking profits after the stock prices have risen continuously since the beginning of 2012.
He said the stock market has risen up to 50% and has dropped only 4%. This is in the nature of stock markets, in which investors have to look at both perspectives.
Analysts from several securities companies viewed that many investors were forced to sell their stock holding because they failed to place the collateral value for margin loans to 20% from 15%, announced Thursday evening after the stock market closed. The measure aimed to clamp down on speculation in the Thai bourse.
Some investors are also selling their stocks to cut losses in the downtrend scenario. These investors usually use programme trading, which sets the selling price in advance.
Another reason is rumours about the government's instability over the push to legislate to raise two-trillion-baht in loans, a move which may be in conflict with the constitution. The assets concealment case against the prime minister, involving a 30 million baht loan to her common-law-husband's company, is another concern.
Analysts also said the strengthening baht, which has almost hit 29 to the US dollar, as another factor in the dive in the stock market.