The Stock Exchange of Thailand (SET) index plunged nearly 3% on Monday as other Asian equities tumbled to multi-year lows on fears that the US economy is falling into a recession, coupled with rising tensions in the Middle East.
The Thai bourse dipped 38.41 points, or 2.93%, to 1,274.67 points on Monday, while Japan’s Nikkei index closed with its largest single-day points drop in history, tumbling over 4,400 points and ending 12% lower.
MSCI's broadest gauge of Asia-Pacific equities outside of Japan fell 3% to mark its worst day since mid-June 2022. An index of Asian emerging markets, in which Taiwan holds nearly a quarter of weightage, lost 3% to hit a three-month low.
“US leading economic indicators, especially labour figures, the Purchasing Managers’ Index [PMI], and purchasing power, raised recession concerns,” said Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities (ASPS).
The figures deepened fears that the US economy was cooling and that the Federal Reserve (Fed) may have waited too long on cutting interest rates, he noted.
A US jobs report released on Friday indicated that employers had slowed hiring significantly in July, with unemployment rising to its highest level in nearly three years. US July non-farm payrolls rose only 114,000, compared to the market consensus of 175,000, while the unemployment rate rose to 4.3%, also higher than the consensus of 4.1%.
“The increase officially triggered the Sahm Rule, which indicates that the economy is in a recession when the three-month moving average of the unemployment rate rose 0.5% or more above its 12-month low, raising concerns over the US economy,” said Apichart Phubunjerdkul, head of strategy research at Tisco Securities.
ASPS also noted that economic support policy measures will be used to prevent recession in the US.
“The Fed may cut the interest rate more than two times this year, bringing US rates down by 0.5% from 5.5% now,” added Mr Therdsak.
This month to date, the Thai bourse slid 0.6%, much less volatile than the Japanese stock market which lost 8.2%, the Nasdaq (-4.7%) and South Korea (-3.4%).
InnovestX Securities said that as the Thai market awaits a clear political picture at home, investors are also fretting about elevated valuations from the artificial intelligence rally, while rising tensions in the Middle East are adding to the risk-off mood. Israel is bracing itself for a possible attack from Iran and regional militias in retaliation for the recent assassinations of Hezbollah and Hamas officials.
Currencies in the region leapt higher as the dollar weakened on rising bets of deeper rate cuts by the Fed. The Malaysian ringgit soared 2.3% to its highest level since late April last year, marking its best day since January 2016, and China's yuan jumped as much as 0.8% to its highest level since the start of the year.
The Thai baht and Philippine peso gained around 0.4% each, while the usually tepid Singapore dollar jumped 0.4% to trade at its highest level this year so far.