The Stock Exchange of Thailand (SET) is facing fresh sell-off pressure, with the index falling close to a key resistance level of 1,430 points on Monday, due to rising global geopolitical risk amid the escalating conflict between Israel and Hamas, according to an analyst.
Global risk-off mode continues to dominate equities following a sharp market loss on Friday, when sustained high bond yields triggered further selling pressure in interest rate sensitive counters in finance and utilities, said Rakpong Chaisuparakul, senior vice-president of KGI Thailand Research at KGI Securities (Thailand).
"The latest fighting between Hamas and Israel could raise geopolitical uncertainties, especially if world political powers such as the US and Iran later get involved in the conflict," he said.
The fighting between Israel and Hamas that broke out during the weekend has caused fund flows to switch to safe assets, especially gold and treasuries.
Gold rose more than 1% to US$1,850 an ounce, driven by the escalating conflict in the Middle East involving Israel and the Palestinian militant group. Oil prices rallied by 5%, with West Texas Intermediate climbing past $87 a barrel and Brent touching $89, as traders braced for a potential escalation that may trigger a supply shock.
Asia Plus Securities (ASPS) said the Israel-Hamas war must be watched closely since it may extend to other countries as Israel and Palestine are supported by different nations.
"Geopolitical risk rises again and the prolonged war may cause inflation to rise," ASPS said in a research note.
A damaged building and rubble are seen in the aftermath of an Israeli strike in Gaza City in this still image obtained from a social media video. Yousef D. Hammash via REUTERS
Palestine is supported by Middle Eastern countries led by Iran, while Israel is supported by Western countries led by the US.
"The war must be watched closely since it may extend across the region and have worldwide impacts. The price of oil may rise since the Middle East makes up one-third of global crude oil supply," said the brokerage.
Stock markets tend to fluctuate during international conflict as war causes negative sentiment on risk assets. The prolonged Russia-Ukraine war has severely pressured stock markets, ASPS added.
But it pointed out that the Israel-Palestine war should not have a significant impact on Thailand's economy. Israel is the 40th largest trading partner of Thailand, while Palestine is ranked 215th. In the first eight months of this year, there were only 159,000 Israeli tourists in Thailand, making up only 0.89% of total tourists.
