Bourse dips on financial equities
Banking sees heavy losses on BoT order
Financial equities were the main catalyst pulling down Thailand's stock market on Monday as banking shares shed heavy losses thanks to a recent order to freeze interim dividend payments to shareholders and suspend stock buybacks.
The Bank of Thailand's order is meant to preserve capital amid sputtering economic conditions caused by the Covid-19 pandemic.
The move also coincides with a directive to cut interest rates on credit cards, personal loans and other forms of credit to help millions of people facing financial stress.
But the central bank's commands caused jitters among investors as they perceived the measures to be a sign of further economic deceleration and a worse than expected impact in the banking sector from the Covid-19 crisis.
The Stock Exchange of Thailand (SET) index fell by 18.64 points or 1.36% to close at 1,352.18 points in turnover worth 65.8 billion baht.
The financial sector was the main drag for the decline, with a 5% plunge. A sea of red was seen in banking equities, one of the subsets of the financial sector, as they tumbled by 6.4%.
Bangkok Bank shares plummeted the most by 9.1%, followed by SCB (-7.4%), KBANK (-6.8%), BAY (-5.7%), KKP (-5.7%) and TMB (-4.6%).
The financial sector makes up 12.4% of the SET's market capitalisation, with banking equities accounting for 9% of the 12% portion.
"Banking plays are no longer favourable for valuation and dividends, triggering fund outflows from banking [equities] to other stocks with high-dividend yields," said Therdsak Taveeteeratham, executive vice-president of research at Asia Plus Securities (ASP).
"We will have to keep an eye on economic stimulus measures, especially bids for infrastructure megaprojects."
Most banks pay interim dividends, except for Krungthai Bank and Tisco Bank, according to ASP.
The move to freeze interim dividend payments and suspend share buybacks for commercial banks is aimed at stabilising capital in the banking sector, which is the main source of funding for the real sector and households, as well as the total deposits of most Thais.
"This issue has disappointed investors who expect interim dividends and raises concerns about rising non-performing loans in the future, especially personal retail loans that account for 39% of total loans, most of them housing loans," said Mr Therdsak.
"Meanwhile, as a result of companies' cost reduction policies, the unemployment rate is increasing, while household income is declining. Thailand is suffering from income shock."
Small and medium-size enterprise (SME) loans, which make up 18% of total loans, are expected to rebound more rapidly than retail loans, but SMEs were not strong even before the pandemic as exports were pressured by the US-China trade war, he said.
For the aid measures to help affected consumers such as lower interest rates and a three-month loan payment holiday for interest and principal, leasing companies will be affected, with Aeon Thana Sinsap (Thailand) Plc hurt the most by a cut in credit card loan rates and cash withdrawal card loan rates, said Mr Therdsak.
Thidasiri Srisamith, executive vice-president of Kasikorn Asset Management, said the Bank of Thailand's measures are deemed positive for banks as these will help Thai banks beef up their preparation for looming uncertainty and the imminent economic impact.