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Published on August 7, 2007

A selling spree by long-term foreign investors has sent the stock market into a tailspin and selling pressure is expected to last for a long time. Many investors are selling Thai shares for the first time in five years.

The sharp fall in regional stock markets was triggered by investors' mounting anxiety over fallout from US interest-rate cuts designed to fight off that country's crisis in sub-prime mortgages, analysts say.

Foreign investors started the sell-off on July 27. Since then they have sold Thai shares with a net position of Bt15.68 billion. The Stock Exchange of Thailand (SET) Index has fallen about 8 per cent since the sell-off started.

Singapore's Straits Times Index has tumbled 3.7 per cent, The Jakarta Stock Exchange Composite Index 3.6 per cent and the Kuala Lumpur Composite Index is down 3.3 per cent.

The Kospi Index closed down 1.2 per cent yesterday, the Weighted Index was down 1.28 per cent and the Nikkei-225 share average closed 0.4 per cent lower.

The Dow Jones Industrial Average has dropped 2.1 per cent and the Nasdaq slumped 2.5 per cent on Friday on further fallout from the US sub-prime crisis. Thai share prices plunged 2.61 per cent yesterday to 815.87, off the day's low of 813.14. Turnover was thin at Bt18.17 billion.

"The selling off of Thai shares every day is the behaviour of long-term investors. They have costs at around 740 points and this indicates that the selling spree has not bottomed out yet. The first resistance level is at 790 points," KGI Securities (Thailand)'s vice president Adisak Kammool said.

So far this year, foreign investors have recorded net sales of Thai shares to the tune of more than Bt10 billion, while they have accumulated Thai shares with a net value of about Bt120 billion, and this is another indicator that selling pressure will prevail, he said.

"We can observe when the foreign investors' selling spree will be over from the points fall every day. If the SET Index loses fewer than seven points, it means the sell-off is slowing down. Corrections in the stock market will be seen until October," he said.

Despite the tumble, KGI Securities is maintaining its SET Index target of 740 points to 790 points this year.

Thanachart Securities managing director Suvabha Charoenying said the Thai stock market had fallen heavily in the past month. When concerns over the US sub-prime-mortgage crisis are added, it becomes likely that there will be "some correction" in the market.

"Also, the Thai authorities have signalled that the baht will not be stronger than its current level, so foreign investors who are used to gaining other profits from currency exchange will not send much money in. These are the global factors," Suvabha said.

"Our internal factor now is the coming general election. Voting on the draft of the constitution is not as important as Prime Minister Surayud Chulanont's commitment to hold the election, for sure.

"A good investment strategy is to set a target for your gains. When you reach it, you sell to obtain profits. When the market falls, you must learn to cut your losses. When the market is down, you gradually collect good stocks at discount prices."

An analyst at Sicco Securities said the foreign investors' selling spree would continue because they are shifting to invest in other financial markets.

Finance reporters

The Nation