Published on October 18, 2005

Likely interest-rate hikes, terror attacks spur the sell-off, led by overseas investors

The Thai stock market plunged below the psychologically important 700-point level yesterday, prompted by anxiety over a selling spree by foreign investors, the possibility of interest rates rising rapidly to tame inflation and continuing unrest in the deep South.

The main composite index started the day with a minimal rise before weakening and falling past the 700-point barrier to close the day at 696.28, a 0.53 per cent drop, although still up from the day’s low of 695.47.

Turnover was thin at Bt10 billion.

Big-cap stocks took the hardest blows.

Charoen Pokphand Foods Plc (CPF) lost 6.09 per cent to Bt5.40 on worries about slowing global demand for chicken following the outbreak of bird flu in Europe, while Kasikornbank was off 2.5 per cent at Bt58.50.

Finansa Securities vice president Chakrish Charoenme-thachai said that local investors held themselves back when foreigners, spooked by rising inflation, became net sellers of Thai shares.

Foreign investors unloaded Thai shares with a net value of Bt8.51 billion between October 3 and October 14. They sold shares with a net value of Bt1.9 billion yesterday.

Investors are also waiting for the outcome of tomorrow’s meeting of the Bank of Thailand’s Monetary Policy Committee (MPC), he said.

Economists forecast that the MPC will jack up the 14-day repurchase rate by a further 25 to 50 basis points in a bid to curb inflation.

The benchmark rate currently stands at 3.25 per cent, 2 per cent higher than in August last year.

Headline inflation in September rose to 6 per cent and the central bank predicts it will climb further in the fourth quarter this year, due mainly to the record high oil price. However, the full year’s headline inflation is expected to average 4.7 per cent.

Meanwhile, investors shrugged off Siam Commercial Bank’s solid third-quarter net profit, TSEC Securities’ Executive Vice President Charoen Iampattanatham said.

SCB reported a jump of nearly 45 per cent year-on-year in its third quarter earnings, from Bt3.64 billion in 2004 to Bt5.27 billion.

Charoen said foreign investors wanted to see the result of tomorrow’s MPC meeting. Part of their reason for selling Thai shares is to prepare to pile up initial public offering (IPO) shares of Thai Beverage Plc and EGAT Plc, he said.

Both stocks are expected to beat Thai Oil in terms of the size of funds they raise from their IPOs. Both plan to go public late this year.

Charoen said the support level forecast for the index today is at 690 and 687 and the resistance level at 700.

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