US$2 trillion (Bt76.7 trillion) has been wiped off the capitalisation of stock markets worldwide in the past month due to hefty inflation-inspired sell-offs, and analysts expect the selling to continue at least until the end of the month when the US Federal Reserve reconsiders its policy rate.

Thailand's market capitalisation plunged Bt170 billion yesterday, to Bt4.71 trillion, as international investors continued the sell-off on anticipation that the Fed at its June 29 meeting will raise interest rates once again to counter inflation - a move which could put a brake on US economic growth. The Stock Exchange of Thailand composite index yesterday tumbled 23.72 points or 3.54 per cent to 646.69, the lowest close in 11 months, on turnover of Bt18.6 billion.

Elsewhere yesterday some markets gained ground slightly while others continued losing, as investors braced for the release of all-important US inflation data later in the day, and the prospect of higher interest rates to follow.

Lower economic growth in the US could lead to lower imports, which would hit exporting countries including Thailand, aside from soaring oil prices and higher interest rates.

Metal prices, along with equities and other commodities, are falling as global investors downgrade their expectations of global growth in response to interest-rate increases in Europe and the US, and tough inflation talk by the US Federal Reserve. Oil prices in Singapore also lost more ground yesterday on an anticipated fall in consumption.

Pichai Lertsupongkit, executive vice president of Prudent Siam Securities, attributed the big sell-off on Monday and Tuesday to the likelihood that the current cycle of rate increases may not have reached its eagerly awaited end.

Further interest-rate increases against a backdrop of slowing economic growth would spell a bleak future for the world's stock markets, at least for the near term, with bonds and bank deposits offering attractive alternatives.

"Because of the fears, European and Asian markets' market cap dropped by 2-4 per cent on June 12-13. The Thai market suffered today largely because it was closed during that period," Pichai said.

He said international investors had sold shares as part of an adjustment to their investment portfolios. In May, the Morgan Stanley Capital International index - a stock market investment reference for global investors - lost one-fourth on average of its peak market capitalisation recorded in February. While Thailand's market cap has lost 19 per cent during the period, US markets shed 10 per cent and European markets 12-14 per cent.

"Most Thai stocks are now traded below their fundamentals, but we expect the market to further dive as foreign investors could further sell off through the redemption of their stock-oriented unit trusts," Pichai added.

His tips to those who want to re-enter the market are that they should wait till the global markets have stabilised, with the key indices unchanged for more than two days, and when the baht stops weakening, which signals the end of capital outflows.

Foreign investors last week sold out stocks worth about Bt30 billion to Bt40 billion. The huge sell-off is expected to lead to huge capital outflows, which could weaken the baht against the dollar.

Atchana Waiquamdee, the Bank of Thailand's assistant governor, said that if that happened, the central bank had to let market mechanisms rule as it is natural for capital to flow from low-return markets to higher-return markets.

"However, if the exchange rate is too volatile, we'll take action. We cannot let the baht move Bt0.50-Bt0.60 per dollar a day, otherwise exporters cannot quote prices properly, although we cannot resist the market completely," Atchana said. She added that it was not surprising for the US to raise the policy rate, but that does not mean Thailand had to follow.

Warut Siwasariyanon, vice president for research at Globlex Securities, said investors had shifted their investment from stock exchanges to the foreign exchange and debt markets, while waiting for the Fed's decision on a rate increase.

"After 650 points, the Thai market's next resistance level is 630 points," he said, expecting the sell-offs to continue for a month until global economic projections are reviewed.

He is optimistic that Asia's growth should be maintained at 6-7 per cent, against the average 5-per-cent global growth. As such, within two to three weeks, foreign investment will return to the region, but not Thailand where political uncertainties are still posing big threats. "Thus, Thailand is not the place for short-term investors," he said.

Newly appointed SET president Patareeya Banjapolchai said that while the sharp slide in the Thai bourse was in line with falls in regional markets, political jitters had put additional pressure on the Thai market. Investors will prefer to keep their heads down until the situation looks clearer.

"However, the sharp fall in share prices offers an investment opportunity. Share prices have already dropped significantly," she said.

Hugh Young, managing director Aberdeen Asia, shared that opinion. "Over the past six weeks, good top stocks have dropped 10-20 per cent. It's an opportunity to buy. It's the same old factors that caused the sharp drop. The foreign investors will finally come back to the Asian market. Two-thirds of the world population is Asian, so there's a huge opportunity to grow."