The Stock Exchange of Thailand (SET) index continued its plunge on Monday as investment appetite was eclipsed by China's retaliatory measures to counter the US's latest tariff threat.
Monday's fall was steeper than last Friday's closing, with the SET index ending at 1,665.99 points, down 18.72 points or 1.11%, in turnover worth 48.5 billion baht.
Major Asian stock indices closed in the red, with Hong Kong's Hang Seng index plummeting by 2.85% and South Korea's Kospi index sinking by 2.56%.
"It is a continuation from last week after US President Donald Trump reignited the trade war," said Trinity Securities executive director Nuttachart Mekmasin.
"The Chinese government allowed the yuan to weaken on Monday, which could be a response to the US tariff threat."
The offshore yuan fell to its lowest level against the greenback since August 2010, prompting speculation that China is using currency depreciation to counter punitive US tariffs.
China's state-owned enterprises have also been asked to suspend imports of US agricultural products, according to Bloomberg.
Mr Nuttachart said the weakening yuan will automatically make the value of US exports goods more expensive compared with those of China.
"This is a new factor. Moreover, there are also protests in Hong Kong that could escalate further, resulting in a drop of the Hong Kong stock market of nearly 3%," he said.
A 1% decline in the SET index is quite minimal compared with regional bourses, said Mr Nuttachart.
Foreign investors were net sellers of 2.65 billion baht and institutional investors offloaded 1.3 billion worth of shares on Monday.
MELANCHOLIC OUTLOOK
Viwat Techapoonphol, deputy mana‑ ging director at Tisco Securities, said many investors have not decided to embark on equity purchases because of concerns over the US's announcement of the imposition of an additional 10% tariffs on Chinese imports.
The tariffs will take effect Sept 1 on US$300 billion in goods.
President Trump tweeted that China has turned back on its promise to buy large US agricultural products, resulting in another punitive tariff by the world's largest economy.
"If the measure takes effect, this would significantly affect the global economy and stock markets worldwide. Investors also expect lower earnings from SET-listed companies, both for year-on-year and quarter-on-quarter," said Mr Viwat.
A greater weighting of Chinese A-shares, from 5% to 15% in the MSCI Emerging Markets index, is expected to cause foreign outflows from local equities worth around 9 billion baht, he said.
A global slowdown is possible amid easing monetary policies to boost economic growth momentum and with the 10-year US Treasury yield lower than the three-month yield for more than two months, indicating global investors are expecting lower growth in the long run, said Mr Viwat.
Tisco Securities anticipates foreign inflows this month, propelled by Thailand's sovereign credit rating outlook being adjusted to positive from stable by two international credit rating agencies, and expectations of looser monetary policies from global central banks.