The Bank of Thailand's policy rate hike of 0.25% and the weakening baht are pressuring the Stock Exchange of Thailand (SET) after the index already tumbled below the resistance level of 1,500 points, say analysts.
The Thai bourse opened lower on Wednesday after falling 0.88% to finish at 1,494 points on Tuesday amid concerns over an interest rate hike.
The index below 1,500 points is a negative technical sign, said Asia Plus Securities (ASPS), adding the bourse has slumped 10.5% this year.
Every quarter-point rate hike has decreased average trading value by 4 billion baht per day based on past figures, said the brokerage. This rate increase will lower the year-end SET target by 66 points from 1,590 points to 1,524 points, said ASPS.
"There are so many risks for the stock market, including the threat of a US government shutdown, the Federal Reserve keeping its rate steady until mid-2024, and worse than expected US personal consumption expenditure figures due on Friday," said Pawarisa Lertkijkhunanont, ASPS's fundamental investment analyst on capital markets.
The brokerage projects the next resistance level at 1,486 points, she said. The SET index has declined 82 points from a peak of 1,579 points in late August.
Amid concerns about an interest rate hike, the Thai one-year bond yield rose 25 basis points month-to-date to 2.44%.
"The yield increase resulted in capital moving from risk assets, including stocks, to the bond market," said Ms Pawarisa.
As of Tuesday, foreign investors were net sellers of 48 billion baht month-to-date, including 22.4 billion in stocks and the remainder in bonds.
"Hawkish statements from a few Fed officials, coupled with renewed investor concern about a US government shutdown, should drive US treasury yields and the dollar index higher," said Rakpong Chaisuparakul, senior vice-president at KGI Thailand Research.
"This does not bode well for regional risk assets in the near term."
The baht was quoted at 36.41 to the greenback Wednesday morning, the lowest in 11 months, partly attributed to dollar appreciation.
The currency edged lower to 36.50 baht to the dollar in late afternoon and analysts said the baht could test 37 to the dollar by the end of the month.