The SET closed down almost 2 per cent yesterday, dipping below the psychological 700-mark for the first time since December due to foreign investors' continuing sell-off ignited by persistent anxiety over interest rate hikes.

Forced sales were seen as another contributor to the steep drop.

The SET index dropped sharply to below the 700-point threshold at the opening bell, falling further to an intraday low of 685.80 shortly after the Bank of Thailand's Monetary Policy Committee (MPC) raised its benchmark interest rate by a further 25 basis points.

The market rebounded slightly to close the day at 688.22. Turnover was moderate at Bt15.24 billion.

Banking, energy, communication, finance and property stocks were at the centre of the selling spree. Advance Info Service Plc slid 5.29 per cent to Bt89.50, Siam Commercial Bank fell 4.35 per cent to Bt55, Kasikornbank slumped 4.24 per cent to Bt56.50, Bangkok Bank was off 2.45 per cent at Bt99.50 and PTT Plc was down 2.5 per cent at Bt234.

Thai shares have slumped nearly 12 per cent since their peak of 787.55 on May 10. Since May 15, foreign investors have sold Thai shares with an accumulated net worth of Bt44.54 billion. Yesterday alone they unloaded Thai shares with a net position of Bt3.94 billion.

But the SET was not the only market in the Asia region to be dealt a hard blow from the enduring selling pressure from foreign investors.

The Jakarta Stock Exchange composite index closed down 2.26 per cent, Kong Kong's Hang Seng dropped almost one per cent, South Korean share prices closed down 2.67 per cent, and the Tokyo Stock Exchange's benchmark Nikkei-225 index lost 1.88 per cent.

The decision by foreign investors to sell shares in Asian markets and switch instead to debt instruments has put pressure on the region's stock markets, and Thailand is no exception, Siam City Securities' assistant managing director Sukit Udomsirikul said.

"The Thai stock market's fate is aligned with those of others in the region and the markets are wary because of foreign investors' lingering selling spree. Selling pressure from local investors to mitigate risk is also aggravating the situation," he said.

"There have been forced salesbut the volume was not too high because the prices of large market cap stocks did not fall dramatically," Sukit said.

Commenting on the increase by 25 basis points of the 14-day repurchase rate by the MPC yesterday, Sukit said the hike was acceptable as it could help stabilise the country's economy.

Headline inflation in May stood at 6 per cent.

Sukit said he was optimistic the policy interest rate hike yesterday would be the last this year because the inflation rate in the second half this year was likely to fall to below 5 per cent.

Headline inflation the year is estimated to be 5 per cent with core inflation 2.5 per cent.

A trader at Kim Eng Securities (Thailand), the country's largest broker in terms of volume, admitted that forced sales had been partly to blame for creating pressure to sell.

Adkinson Securities' assistant managing director Amaret Singhanarong said that forced sales as well the sell-off by foreign investors had both contributed to the steep fall.

The next support level of the SET index is at 660 points.

"Foreign investors have moved their money into debt instruments, betting that the US Federal Reserve will jack up its rate further at a meeting later this month," Amaret said.

He said the MPC's interest rate hike to 5 per cent yesterday had dealt a psychological blow to the Thai stock market as the Finance Ministry had earlier warned the any rate increases would hurt already slow investments.

An absence of fresh positive factors was also blamed for the sharp decline in Thai shares, Amaret said.

Siriporn Chanjindamanee

The Nation