Free fall continues as foreigners dump Thai stocks

Foreign investors continued their selling spree, prompted by nervousness over the instability of the US financial sector. Local political tension also weighed on the stricken bourse.

Analysts have issued a grim prediction that the worst is not yet over.

The Stock Exchange of Thailand (SET) Index dropped mildly at the opening bell yesterday, and a widespread sell-off in big market cap stocks followed, dampening the market to close at the day's trough of 669.97 points. Turnover was thin at Bt15.64 billion. Yesterday alone, foreign investors dumped Bt3.7 billion worth of Thai shares.

PTT was down 7.41 per cent to Bt250, PTT Exploration and Production 6.25 per cent to Bt150, Bank of Ayudhya 8.24 per cent to Bt16.70, Siam Commercial Bank 4.23 per cent to Bt68 and Kasikornbank 2.38 per cent to Bt61.50.

Thai shares have fallen more than 20 per cent so far this year, and about Bt1.25 trillion in market capitalisation has been lost. Foreign investors have sold Thai shares with a net position of Bt78 billion.

The slump was reflected yesterday in other Asian markets, dragging the region's benchmark index to the lowest level since October 2006 on concerns of slowing global growth and widening credit-market losses that will hurt earnings.

Siam City Securities assistant managing director Sukit Udomsirikul said the Thai market might sink further based on records of the local market dipping below the psychological 700-point level on four occasions since 2005. On each occasion, it bottomed out when the SET Index fell to 630 points.

He said it would take about 10 months to climb back above the 700-barrier in the worst-case scenario but around two months in the best case.

"Investment in the Thai stock market may be difficult in the second of half the year, due mainly to high volatility in the bourse," Sukit said.

Securities Analysts Association secretary-general Sombat Narawutthichai said his association was likely to revise its consensus figure for this year's SET Index target to below 900 points soon, from the present consensus of 927 points.

The government's six measures to help alleviate the cost-of-living burden on low-income consumers over the next six months and the Bank of Thailand's 25-basis-point cut in its policy interest rate has not boosted stock-market sentiment, he said.

A Sicco Securities analyst said forced sales might be blamed for yesterday's steep slump in the Thai bourse. Big market-cap stocks have declined significantly, and forced sales in marginal loan portfolios may be the cause.

Meanwhile, SET president Patareeya Benjapholchai rushed to allay the jitters, saying the Thai stock market's loss was in tandem with a steep slump in Singapore and Malaysia.

"The steep drop presents an investment opportunity to snap up Thai shares with solid fundamentals and good dividend yields," she said.

Siam City Securities managing director for brokerage business Satit Wannasilpin said there were signs of inflation peaking in the third quarter; therefore, investment was likely to expand in the third and fourth quarters. However, the index would not reach as high as 900 points.

"Right now, the price-to-equity ratio is less than 10, which means the earnings ratio is higher than 11-12 per cent. Therefore, it's the right time for long-term investment," Satit said.

The Siam City Research Institute reported the capital market was still unstable and would possibly fall further in the third quarter. However, the market is expected to recover in the fourth quarter, with the index rising to 850-900 points.

The institute said the sell-out by foreign investors was about to end, but the local political factor remained unpredictable.

It expressed optimism for the Thai stock market, predicting the SET Index will rise 8-9 per cent later this year to outperform the region. However, the institute is not recommending investment in businesses related to domestic consumption, such as real estate or personal loans.