Many global markets crashed on Wednesday, with Thailand's stock market following suit on Thursday, dipping by 1.98%.
Investors were disappointed with the chairman of the Federal Reserve's statement that the Fed is retaining it monetary policy without any new stimulus measures.
The Thai stock market fell to its lowest point in a month, with investors selling off large-cap stocks, especially bank and energy stocks.
Some analysts projected the SET Index had been edging closer to an upside limit, driving investors to sell stocks after prices dropped to take profits.
Pichai Lertsupongkit, first vice-president at Thanachart Securities, said the Dow Jones Index slipped 2% on Wednesday, while the German government downgraded its 2021 economic growth forecast from 4.4% to 3%, signalling that European economies are still reeling from the slowdown.
Mr Pichai said if the European economies remain in a slump, the European Central Bank may cut interest rates further, in effect decreasing banks' net interest rate margin, which will then drive bank stocks to fall.
In addition to bank equities, he expects the prices of energy stocks and gold to decrease as gold prices have an inverse relationship with the US dollar.
Thanomsak Saharatchai, head of research at Krungthai Seamico Securities, said foreign investors have gradually sold Thai stocks this week, driving funds to adjust the weight of Thai stocks according to the MSCI AC Asia ex Japan Index, in which Thai stocks currently make up 2-3% of the index.
Global equity markets dropped following the Federal Open Market Committee's (FOMC) resolution to maintain its existing monetary policy without any additional stimulus measures.
According to the FOMC's statement, the policy rate will be maintained at 0-0.25%, while quantitative easing will be retained at US$120 billion per month until the inflation rate averages 2% and the employment rate fully rebounds.
Other factors to follow are Thai listed companies' fourth-quarter performance, US GDP growth and US listed companies' profits, which can further influence stock market directions, said Mr Thanomsak.
"The Thai stock market dropped a few days earlier and made a slight correction on Thursday. The future direction of the SET will be influenced by the upcoming report on Thai listed firms' performance in the fourth quarter of 2020," he said.
"The results can instigate both positive and negative investment conditions. Most Thai companies have adapted well to the new business environment thanks to strong fundamentals, but Thai GDP growth in 2021 will remain lower than other emerging markets."
The SET Index on Thursday closed at 1,468.51 points, a drop of 29.62 points or -1.98%, in trade worth 92.6 billion baht.