An economist, an analyst and a fund manager warned that there were still no signs of foreign capital inflow, while there are higher risks from domestic political and economic factors. However, capital may start flowing in if the US Federal Reserve signals that it will not hike its policy rate further.

At a seminar entitled "Catch up with Foreign Capital Inflow... Is it Really Shunning Thai Stock?" held by Money and Wealth Magazine, speakers included Usara Wilaipich, an economist from Standard Chartered Bank (Thai), Paiboon Nalinthrangkurn, vice president of Tisco Securities, and Maris Tarab, managing director of ING Funds Asset Management (Thailand).

Usara said that in the past month, foreign investors had sold Thai stocks worth as much as Bt37 billion. However, their capital is still "parked" in non-resident accounts in Thailand, in the money market, or in short-term government bonds. The "money-parking" practice shows that there will be a chance for foreign investors to take profits from local and Asian currencies again in the second half, particularly from the yen and the baht

She said the foreign exchange market would be more volatile in the second half than it was in the first because the US dollar is likely to depreciate significantly against other currencies. The US currency will reach a peak, while other currencies will become even stronger.

Usara warned that foreign investors were likely to sell Thai stocks in the second half because commodity prices will remain low and the value of the US dollar will depreciate. This is likely to push the value of the yen up to between 105 and 108 per dollar, while the US economy slows down.

She said if the US Federal Reserve signals that it will not raise its policy rate again, it would be a crucial factor indicating that there will be another round of capital inflow into low-risk assets or bonds.

The National Economic and Social Development Board yesterday announced that gross domestic product grew by 6 per cent in the first quarter, reflecting a slowdown from the fourth quarter last year. It is likely to be the highest quarterly growth figure this year.

Usara predicted GDP growth of 4.1 per cent for the whole year. She believes the Bank of Thailand will raise its policy rate tomorrow by 0.25 percentage points to 5 per cent.

Paiboon said foreign investors would shift back to the Thai market again if they see a clear sign that the US central bank will not raise its policy rate further. However, he believes there will be no such "clear sign" in the next three months. Therefore, the Thai stock market is likely to remain sluggish in the third quarter.

"It will be difficult for the Thai stock market to recover in the next three months. According to talks with foreign investors, they have less interest in investing. They can leave the Thai market at any time," he said.

Maris said local funds had bought Thai stocks continually, while foreign investors have sold. This is because of new money from mutual funds, and long-term funds.

Siriporn Chanjindamanee

The Nation