Thai stock market could sink below 1,300 amid foreign investor exodus

In a worrying development, analysts signalled that the Stock Exchange of Thailand (SET) index, which plummeted to a three-year trough yesterday, could continue its descent to below 1,300 points in the short term as foreign funds persist in their exodus.

The Thai stock market appears unaffected by the recent resurgence of other equity markets, despite encouraging indicators emerging since last month, such as falling inflation and interest rate tendencies. This observation was made by Sorrabhol Virameteekul, the senior vice president of Kasikorn Securities.

The SET index suffered a 1.16% decline yesterday, reaching its lowest point since November 18, 2020, said Sorrabhol.

“Foreign investors, who are responsible for up to 40% of trading on the SET, seem to have abandoned the Thai market. Last year, they purchased Thai stocks worth 190 billion baht (US$ 5,407,945,300) and have already offloaded stocks amounting to 200 billion baht this year.”

He cited three primary factors contributing to the dwindling appeal of Thai stocks to foreign investors: uncertainties surrounding the government’s digital wallet initiative, potential defaults on 1 trillion baht worth of debentures in the coming year, and a lower-than-anticipated influx of foreign tourists, said Sorrabhol.

“The potential 10,000-baht digital handout could swing the GDP 0.5% in either direction, depending on its implementation. That’s significant. For the government to execute this scheme, it has to pass three major hurdles, namely the Office of the Council of State, the Constitutional Court, and Parliament.”

Index drop

Sorrabhol further highlighted the concern that numerous companies, particularly in the finance and property sectors, are forecasted to roll over debentures in January next year. There is a palpable fear among investors that these firms will flounder if they are unable to roll over their debts, reported Bangkok Post.

“These three elements have a fundamental impact and could potentially harm Thai stocks. In a worst-case scenario, the index could drop below 1,300 points.”

Echoing these sentiments, Rakpong Chaisuparakul, the senior vice president of KGI Securities (Thailand), noted that Thai stocks took a further hit yesterday after a weaker-than-anticipated session on December 12 that saw selling pressure on China-linked stocks.

“Despite the US stock market consistently hitting new peaks, backed by November CPI figures in line with expectations and remarks from US Treasury Secretary Janet Yellen that US inflation could align with the Federal Reserve’s target, these positive aspects are unlikely to greatly benefit the Thai market.

“Local stocks could face a further downturn due to a continued drop in WTI crude prices, which fell by 3.73% on December 12 amid global demand uncertainties and investor scepticism regarding Opec Plus’ ability to regulate oil prices, and the baht’s weakness despite a decrease in the US dollar index.”