Stocks retreat on valuation concerns

Stocks retreat on valuation concerns

New catalysts needed for further rally, says analyst

(Bangkok Post file photo)
(Bangkok Post file photo)

Thai stocks dropped after climbing to a two-year high on concerns the recent rally may have been too fast with a key technical indicator showing the market was overbought.

The benchmark SET Index dropped 0.7% to close at 1,636.45 after reaching the highest intraday level September 2019.

The 14-day relative strength index climbed above 70, pointing to overbought conditions. Still, the Thai benchmark has rallied about 7.5% in the past month to become the biggest gainer among Asia’s main equity measures.

“Thai equities entered an overbought territory and should be subject to some profit-taking,” said Tawatchai Asawapornchai, the deputy managing director at ASL Securities Co in Bangkok. “The market now needs new catalysts for any further rally.”

The recent gains were driven by expectations the country may further ease travel restrictions for overseas tourists and buoy growth.

Asian countries from Singapore to Indonesia and the Philippines are implementing policies to deal with the endemic nature of the outbreak to protect livelihoods and save their economies from extending a slump.

“There will be a significant return of international tourists next year with the nationwide vaccine rollout,” said Srikanya Yathip, the head of Government Pension Fund. “This would be the biggest driver for Thai economic recovery.” 

Thailand plans to create more access to its popular tourist destinations, including Bangkok and Pattaya starting next month.

The government may also let its state of emergency expire at the end of this month, with the Covid-19 outbreak already showing signs of easing, National Security Council secretary-general Natthapol Nakpanich said Monday. 

Thailand on Tuesday reported 13,821 new Covid-19 cases, the lowest total in more than six weeks.

Foreigners have bought about $90 million of Thai stocks this month, adding to an inflow of $175 million in August, according to data compiled by Bloomberg.

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