Foreign investors returned from net selling of 15 billion baht in June to net buying of nearly 5 billion baht last week, as the uptick rule took effect on July 1, resulting in a decrease in short selling to 1.5 billion baht per day from an average of 6.2 billion last month.
The implementation of the uptick rule, a measure to control short selling transactions aiming to reduce volatility in securities trading, caused the average daily trading value of the Stock Exchange of Thailand to dip 25% to 31 billion baht, said Prakit Siriwattanaket, managing director of Merchant Partners Asset Management.
Foreign investors were net buyers of nearly 5 billion baht of Thai stocks, representing 46% of the total trading value, down from 55% previously, while retail investors made up 35%, up from 31%. Foreign buying was done mainly via non-voting depository receipts (NVDR).
"The uptick measure increases transaction costs for retail investors because they have to offer a higher price for a share than the previous price. However, more time is needed to evaluate the effectiveness of this measure [in curbing short selling transactions]," said Mr Prakit.
Asia Plus Securities (ASPS) said foreign investors were net buyers of 53,946 contracts of SET50 Futures last week, in contrast to net selling of 72,813 contracts the previous month.
According to the brokerage, the central banks of many countries may continue to cut interest rates further in the third quarter. The FedWatch Tool expects the Federal Reserve to slash the rates twice this year to 5.0%, and three times in 2025, lowering US rates to 4.25%.
"Fund flows would then have a chance to flow back because foreigners could gain additional profits from the exchange rate, while the valuation of Thai stocks remains inexpensive and the economy is on a gradual recovery path," ASPS said in a research note.
The US 10-year bond yield has been higher than that of the Thai government bond yield since mid-2022, pressuring foreign funds to flow out and the baht to depreciate.
Foreign investors have divested some 300 billion baht worth of Thai stocks, plus another 200 billion of debt instruments.
This week, ASPS recommends fundamental stocks that foreign investors buy often through NVDR, including those benefiting from a strengthening baht, such as PTT Exploration and Production (PTTEP), Bangkok Bank (BBL), CP All, Kasikornbank (KBANK), Global Power Synergy (GPSC), BGrimm Power (BGRIM), Thai Oil (TOP) and Central Retail Corporation (CRC).