Thai stock market plunges amid public debt concerns and reduced GDP forecast

Following a decline of over 1.5% yesterday, the Stock Exchange of Thailand (SET) dropped below the 1,450 points mark. This follows mounting apprehensions concerning escalating public debt and economic growth after the World Bank scaled down its forecast for the Thai GDP.

Daol Securities (Thailand) noted selling pressure from the majority of investor groups due to persisting worries about the Federal Reserve’s potential interest rate hike. The baht, in response to the continuous appreciation of the US bond yield and dollar, has fallen to an 11-month low, dipping below 37 baht (US$1).

The Thai bourse, heavily reliant on energy stocks, has also been impacted by a decline of over 2% in global oil prices.

Daol Securities noted that as investors gradually reduce risks, we foresee a continued decline in the SET index because no positive factors have been observed in the Thai market recently.

The brokerage further noted that investors’ preference to hold cash represents a negative trend for the stock market. On the domestic front, there are concerns about the high level of household debt and the potential expansion of the public debt ceiling.

The World Bank recently revised its Thai GDP forecast for 2023 from 3.6% to 3.4%, and its 2024 outlook from 3.7% to 3.5%, attributing it to an export slowdown and increasing public debt potentially pressurising public and private investments, reported Bangkok Post.

Oil pipeline

Meanwhile, following a six-month closure, Turkey plans to reopen the oil pipeline from Iraq this week, potentially increasing the oil supply. Energy consultancy Rapidan Group suggests that Saudi Arabia may ramp up oil production once the Brent crude price surpasses US$90 per barrel.

Globlex Securities’ research director, Wilasinee Boonmasungsong, pointed to a number of negative factors currently burdening the Thai stock market. Most notably, the World Bank has expressed concern over increasing household debt, which now approaches 80% of GDP, the highest in the region.

Foreign investors have sold Thai stocks worth 157 billion baht this year, while other investor types have been net buyers.

Investors are advised to monitor government policies and Commerce Ministry-released export figures and trade data this week, according to Wilasinee. She also urged investors to track third-quarter bank earnings reports, set to be gradually announced in mid-October.

Asia Plus Securities (ASPS), however, believes that the SET index is unlikely to rebound, although the downside is relatively low.

ASPS maintains that the updated Thai GDP forecast from the World Bank, still higher than other institutions, will barely affect the SET index.

It anticipates that economic stimulus measures will start showing results from the fourth quarter of this year, with GDP predicted to peak in the second quarter of next year.

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