Thai shares fell by 0.58% yesterday and the baht weakened after the US Federal Reserve vowed to press on with stimulus cuts, raising more concern that the sell-off in emerging markets will intensify.
The Fed's move has exacerbated jitters over the economic and financial health of emerging markets that was sparked by Chinese manufacturing index shrinking for the first time in six months this month to below the 50-point threshold and the devaluation of the Argentine peso.
At least US$1.8 trillion has been erased from global stocks since Jan 22 as currencies from Turkey to Argentina slid, Bloomberg reported.
Yesterday the Stock Exchange of Thailand (SET) index, tracking most regional bourses' declines of about 1-2%, started the day on a negative note.
It finished the market at 1,264.07 points, bouncing back from the day's trough of 1,258.05, with anaemic trade worth 21.1 billion.
The baht weakened to 32.96/33.00 from 32.90/32.92 on Wednesday.
Fed policymakers cut the pace of bond buying for a second straight meeting by another $10 billion a month to $65 billion.
Therdsak Thaveeteeratham, the head of research at Asia Plus Securities (ASP), said regional and emerging bourses were also under pressure from the Fed's tapering, which sparked capital outflows.
Local political tensions have also given another blow to the SET, as investors unload Thai shares to mitigate risks ahead of Sunday's general election.
"Short-term interest rates in many emerging countries such as China, Argentina, India spiked rapidly. This may signal capital outflows," said Mr Therdsak.
He tipped support at 1,250 points and resistance at 1,280 and suggested that trading investors hold off amid the high uncertainty.
Bank of Thailand spokeswoman Roong Mallikamas said the baht, which lost marginally, still moved in line with other regional currencies.
Foreign investors have adjusted their investment portfolio amid volatility in the global financial market and the Thai election on Sunday, but this is not panic-selling since Thailand's economic fundamentals remain sound, she said.
The central bank has been implementing macroeconomic policies to maintain stability, said Mrs Roong, adding emerging-market economies with sound macroeconomic policies and stability can withstand capital outflows.
Under the Fed's monetary stimulus, the investment trend is shifting from higher risk in emerging markets to developed markets.