The baht fell to a 10-month low beyond 36 to the US dollar, while the Stock Exchange of Thailand slipped closer to 1,500 points on Wednesday on continued fund outflows as investor concerns grew about expected massive bond issuance to fund government stimulus policies, according to analysts.
Prakit Siriwattanaket, managing director of Merchant Partners Asset Management, said the market predicts the government will have to borrow a huge sum of money via bond issuance next year to finance its ambitious programmes.
“The chance the SET Index slipping below 1,500 points is high and trading is likely to remain subdued near the year-end,” he said.
The SET Index, which has lost nearly 10% since the start of the year, closed on Wednesday at 1,507.90 points, down 15.06 or 1%, in turnover totalling 54.5 billion baht.
On Tuesday, foreign investors sold 1.17 billion baht worth of Thai stocks and 1.7 billion worth of bonds.
The baht slid 0.6% on Wednesday, its second day of decline, marking its lowest level since Nov 10, and analysts now view the next resistance level for the ]currency at 36.30 to the dollar.
“The market wants to see what the new administration is capable of in terms of handling economic issues before confidence is restored,” said Mr Prakit.
“Once confidence improves, then the SET index can rebound late in the last quarter of this year and the first three months of next year.”
Reuters reported on Wednesday that the administration plans to sell up to 272 billion baht worth of government bonds from October to December, citing sources who attended a Finance Ministry meeting with industry participants.
The Public Debt Management Office did not provide details, but said a schedule for bond auctions would be released next week.
Soraphol Veerametheekul, assistant vice-president of Kasikorn Securities, said the Thai bond yield has risen to 3.1% along with an increase in bond yields globally, pressuring the equity yield gap.
“As the bond yield is high, investors have to weigh what they should invest in because investing in stocks is riskier. That factor is pressuring the Thai stock market,” he said.
Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand), said foreign equity outflows continued to weigh on most large-cap stocks given the pressure from the baht’s weakness and surging bond yields.
“Thai equity valuations should still be pressured by a sharp rise in government bond yields, while investors become increasingly worried about the country’s credit rating into 2024,” he said in a research note on Wednesday.
The Finance Ministry has yet to update the funding plan for the 10,000-baht digital wallet scheme, said Mr Rakpong.