• 
• 

Published on August 17, 2007

The SET index shed 3 per cent yesterday, while other Asian stock markets reeled in the biggest one-day sell-off in recent years from global selling pressure caused by lingering anxiety over the US sub-prime mortgage turmoil and redemption of global unit trust holdings.

Shock waves that knocked the Dow Jones Industrial Average overnight to below the 13,000 mark for the first time since late April spread out to Asian and European stock markets. This followed Merrill Lynch's caution that credit market conditions could lead US mortgage lender Countrywide Financial into bankruptcy. Countrywide is the largest US mortgage lender by volume.

The Thai composite SET index slumped 4.43 per cent at one point. It fell sharply at the opening bell and headed further south before staging a recovery in late trade to finish at 750.69, or 3 per cent lower.

Hefty losses in Thai shares yesterday were caused by substantial falls in other markets, reflecting global concern over the US sub-prime mortgage problems, said Stock Exchange of Thailand president Patareeya Benjapolchai

"The market's loss will likely be only temporary," she said. "Brokers should communicate with local investors, telling them not to panic."

Foreign investors have been net sellers of Thai equities since late July as they scramble to raise cash to meet redemption at home and to weather the credit squeeze.

The US market is unable to hold a gain because "the cost of borrowing money is rising dramatically, and access to credit is being cut off in critical areas such as mortgages and certain areas of the financial market," said Kevin Caron, portfolio manager at Ryan Beck and Co.

"As a result, stocks will tend to under-perform because this situation creates questions about the economy."

Countrywide Financial fell 3.17 points, or 13 per cent, to 21.29 and has seen 50 per cent of its market value lost since the year began. Fears that the US's largest mortgage lender by volume is contending with difficulty in accessing the commercial paper market to raise cash spurred the selling.

In South Korea, traders made up for their absence on Wednesday due to a holiday. The Kospi slid 5.2 per cent to 1723.78, its lowest level since late June, prompting the Exchange to halt programme trading for five minutes.

Philippines share prices closed 6 per cent lower, and Taiwan's weighted index lost 4.56 per cent.

Singapore's benchmark Straits Times Index and Hong Kong share prices both fell 3.3 per cent. The Tokyo Stock Exchange's benchmark Nikkei-225 Index tumbled almost 2 per cent, off of the day's worst level at 3.74 per cent.

Australia's S&P/ASX 200 dropped 0.9 per cent to 5737.1, New Zealand's NZD 50 Index lost 1.3 per cent to 3952.6, and Japan's Nikkei-225 lost 1.5 per cent to 16,225.90.

The index of leading UK shares lost 2.2 per cent to 5,909.1 points by 12.30BST on the back of heavy falls in Asia and further declines on Wall Street, according to BBC News.

France's Cac-40 Index was 3 per cent lower while Germany's Dax-30 was down 2.6 per cent.

The Bank of Thailand is closely monitoring capital flows, governor Tarisa Watanagase said yesterday, as foreign investors, unnerved by the prospect of a global credit crunch, shifted funds out of the country's stock market.

The governor reiterated that the central bank has no immediate plan to remove the capital controls it imposed last December.

She told reporters that the recent spike in the dollar/baht exchange rate in the offshore market was due to several factors including the central bank's move to temporarily allow certain swap transactions to migrate from offshore to onshore.

The market could fall further today should Wall Street shares continue to head south overnight, but "technically the SET has been deeply oversold and it should soon be able to stage a rebound. Investors should start to look for a good entry point in a day or two", said Peter Limsupanark, a strategist at BFIT Securities.

The Nation,

Dow Jones Newswires