Asian bourses outshine SET on multiple fronts

Asian bourses outshine SET on multiple fronts

Foreign investors dash from baht

Uncertainty over flaring domestic political turmoil has put pressure on the baht's value and caused foreign capital outflows, a stark contrast to foreign inflows moving into other emerging Asian stock markets.

Several emerging Asian stock markets have outperformed this month because of fund inflows, with the Philippines Stock Exchange index nudging up by 10%, while the Jakarta Composite index gained 5%. Asian bourses averaged a 5% rise, according to Asia Plus Securities (ASP).

On the contrary, the Stock Exchange of Thailand (SET) index has plunged by 2.5% this month, a continuous decline from a 5% drop in September, according to ASP.

The month-to-date net equity sell-off by foreign investors on the SET tallied 14 billion baht as of Oct 27, while year-to-date outflows totalling 292 billion.

"In addition to [domestic] political tensions there are capital outflows, the baht's depreciation and the stock market falling, as the SET has lost the opportunity to attract capital inflows even though we have control over outbreaks," said Paradorn Tiaranapramot, assistant vice-president at ASP.

"We don't know how and when it [the domestic political turmoil] will end."

Mr Paradorn said demands from protesters differ from past political rallies as they are calling for a reform of the monarchy, while other demands, such as constitutional amendments, are possible by December.

Protesters' calls for the resignation of incumbent Prime Minister Prayut Chan-o-cha have been met by dogged resistance from the premier.

ASP expects the SET index will move in within 1,155-1,250 points if the domestic political situation does not deteriorate further.

For regional bourses, Asian stock markets have been in the spotlight again after US and European stocks market were shunned by nervous investors over a second wave of coronavirus that is seeing higher daily infections than the first, said Mr Paradorn.

Democrat presidential nominee Joe Biden's policy to raise taxes in the country has raised concerns that US-listed firms will see lower profits, therefore money has moved from US to Asian stocks, where Mr Biden's international trade policy has more flexibility than incumbent US president and Republican presidential nominee Donald Trump, he said.

Nuttachart Mekmasin, executive director at Trinity Securities, said domestic politics is the main factor putting pressure on the Thai stock market, while the demands from protesters seem to be far from achievable.

If events do not become more severe, the negative impact will be limited and the SET index is expected to move in a very narrow range under this scenario, said Mr Nuttachart.

In the past, the Thai stock market has seen sharp recoveries in the aftermath of coups, political rallies or a political vacuum, but domestic equities and the SET index have seen a steep decline on the back of economic downturns exacerbated by the pandemic, in addition to the domestic political instability, he said.

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