Foreign investors are expected to return to the Thai stock market when they see progress in the government's economic policies, baht stability, and an improving economy, says the Stock Exchange of Thailand (SET).
The SET index finished at 1,471.43 points at the end of September, down 6% from August and in line with other regional peers. The index has contracted by 11.8% year-to-date. Foreign investors were net sellers for the eighth straight month in September with a net outflow of 22.4 billion baht.
However, the trading ratio of foreigners was the highest among investor types for 17 consecutive months, said Soraphol Tulayasathien, senior executive vice-president of the SET.
The average trading value of the SET and the Market for Alternative Investment plummeted 34.1% year-on-year to 49.5 billion baht. In the first nine months of 2023, the trading value of both markets averaged 56.2 billion baht a day.
The dip could be attributed to US bond yield spikes after the Federal Open Market Committee kept the policy rate on hold at September's meeting and ruled out a US recession this year, he said.
The US central bank's tightening cycle appears to be lasting longer than expected, which has propelled the US dollar rally, said Mr Soraphol.
"Fund outflows occurred in several stock markets in Asia last month, leading to fund repatriation to US bonds, a firmer dollar, and China's fragile economy. The outflow weakened other currencies, especially the baht, which substantially declined," he said.
Mr Soraphol said most analysts are optimistic about the Thai economy this year and next because of domestic consumption, tourism and an export turnaround.
"Foreign investors are waiting for the right time to return to the Thai market, pending progress on the government's economic policies, a clear direction for the baht, and Thailand's economic recovery," he said.
The Thai stock exchange's forward price-to-earnings (P/E) ratio was 16.5 times at the end of last month, greater than the average of Asian stock markets at 12.8 times. The historical P/E ratio is 22.5 times, exceeding Asian stock markets' average of 14.7 times. The dividend yield for the Thai bourse was 3.15%, below Asian stock markets' average of 3.39%.