Downside risks remain for the Stock Exchange of Thailand (SET) index after it plunged to a five-year low on Tuesday on heightened fears of a global recession as trade anxiety ramps up, say analysts.
As other Asian exchanges recovered from a global sell-off, the Thai bourse contracted nearly 6% to a low of 1,059 points during the morning session in catch-up selling from a holiday on Monday, while Indonesia returned from a week-long holiday to 9% losses.
The decrease was mainly driven by heightened volatility from steep US tariffs. Volatility has surged, with US$10 trillion wiped away from global equities after the US announcement last week, amid fears of a global recession and escalating trade wars.
"Negative factors remain in the market, as China decided to retaliate by implementing a 34% tariff on US goods, while Europe expressed frustration and vowed to retaliate soon," said Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand).
Based on global trade tensions, several investment banks raised the probability of a US economic recession, while the US Federal Reserve still looks reluctant to cut interest rates aggressively based on chair Jerome Powell's remarks on Friday, he said.
The SET index traded at its lowest level since the pandemic, and year-to-date the index has declined by 19.6%, said Suwat Wattanapornprom, head of research at Krungsri Securities.
The SET announced measures on Monday to ban short selling of all but market-maker stocks until April 11. The trading band for most stocks was halved from 30% to 15%, and foreign lists from 60% to 30%.
"Those measures will help prevent the SET from falling faster. If short selling is allowed, the Thai market could dip further," he said.
However, Mr Suwat shared the view of other analysts that SET volatility would remain, depending on risk sentiment for the trade war and impacts for Thailand.
"If monetary policies are eased, that would help mitigate the impacts of the US tariff hikes on the economy," he said.
Kiatnakin Phatra Securities (KKPS) released an investment strategy report, noting the Thai bourse faces pressure from a sluggish domestic recovery, tight monetary policy, and mounting international tax concerns.
The index could test 1,000 points, which may prompt government stimulus in a "policy panic" response, stated the report. KKPS downgraded its SET index target for 2025 to 1,230 points from 1,460, reflecting only a 5% upside from current levels. The only potential support is cheap market valuations compared with fundamentals, noted the brokerage.