Flows scramble for safety as US-Iran tensions brew

Flows scramble for safety as US-Iran tensions brew

A sea of red on monitors at Asia Plus Securities. (Bangkok Post photo)
A sea of red on monitors at Asia Plus Securities. (Bangkok Post photo)

Fund flows have moved into long-term government bonds and gold as investors offloaded equities to seek refuge in safe-haven assets amid heightening geopolitical tensions between Iran and the US.

Panic selling was seen across global bourses, with the Stock Exchange of Thailand (SET) index plunging the most in Southeast Asia, shedding 26.47 points or -1.7% to close at 1,568.50.

Japan's Nikkei 225 index topped the nosedive chart for Asia-Pacific bourses as the equity benchmark plummeted by 1.9%.

"The market will closely monitor the conflicts between Iran and the US. In my view the situation will not escalate into a full-fledged war, although major collateral damage or a violent attack cannot be ruled out," said Paiboon Nalinthrangkurn, chairman of the Federation of the Thai Capital Market Organizations.

"In Thailand's equity market, fund flows have certainly moved from risky assets to lower risk asset classes. The SET index, where energy shares make up a large portion of total share structure, can naturally hedge itself against rising global conflicts," said Nuttachart Mekmasin, executive director at Trinity Securities.

Movement of bond yields and gold prices was a stark contrast from stock sell-offs seen worldwide as growing concerns over Iran's retaliation for General Qassem Soleimani's assassination boosted investment demand for risk aversion.

An investor monitors a screen of red at Tisco headquarters in Bangkok. The SET index yesterday plunged the most in Southeast Asia by 1.7%. (Photo by Arunothai Puttaruksa)

On Monday, non-resident inflows into Thai bonds were valued 1.05 billion baht, of which 1.02 billion were identified as inflows into long-term government bonds, according to Thai Bond Market Association (TBMA) data.

The 10-year government bond yield also fell to 1.36% as external uncertainties prompted investors to reduce risk exposure by moving their capital into debt securities, said TBMA executive vice-president Ariya Tiranaprakit.

Gold was another safe-haven asset class that saw an upward trend, rising to a near seven-year high to 1,576 per ounce.

For Thai brokers, domestic politics is the most important factor since last year's anti-government demonstrations suggest the potential for a recurrence in the coming period, said Bualuang Securities president Pichet Sithi-Amnuai.

The government must have a strong showing after being in office for around six months as investors are waiting for progress in public investment for infrastructure projects, said Mr Pichet.

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