Shares yesterday plunged 1.6 per cent on anxiety over the record-high oil price triggered by the Middle East's mounting tension from the Israel-Lebanon conflict.

The SET Index started with a sharp tumble and moved in negative territory for the entire day. It closed at 661.59, off the day's trough of 659.08. Turnover was thin at Bt11.34 billion as foreign investors sold shares with a net worth of Bt358.78 million.

The Jakarta Stock Exchange Composite index lost 2.28 per cent, the Straits Times Index fell 1.38 per cent, Hang Seng dropped 1.04 per cent, KOSPI closed down 2.33 per cent, and Tokyo's benchmark Nikkei 225 fell 1.67 per cent.

Local shares have slumped 3.69 per cent in the two trading days since Israel attacked Lebanon.

Banking stocks were at the centre of selling pressure yesterday. Siam Commercial Bank (SCB) was off 4.46 per cent at Bt53.50, Kasikornbank (KBANK) slid 4.24 per cent to Bt56.50, Bangkok Bank (BBL) declined 2 per cent to Bt98, and TMB Bank fell 2.41 per cent to Bt3.24.

"The steep drop in Thai shares today could be mainly blamed on geopolitical factors. Foreign investors are scared after the oil price hit a new record high due to the Middle East tension," BFIT Securities director Anuphon Sriarj said.

Oil prices were hovering around US$78 per barrel as the military offensive by Israel in Lebanon drives concerns over supply from the Middle East and a possibly wider conflict in the region.

Thai oil-retailers, excluding state-controlled oil and gas conglomerate PTT, will today raise their retail prices of petrol and diesel by Bt0.40 a litre, bringing retail prices to fresh record highs.

Premium petrol will rise to Bt30.59, while regular petrol and high-speed diesel will retail at Bt29.79 and Bt28.34 respectively.

The political turmoil here also dampened local market sentiment, Anuphon said.

The SET Index is likely to head further south next week, he said, adding that the Bank of Thailand's decision on the 14-day repurchase rate and the Middle East situation had to be closely watched.

Padermpob Songkroh, assistant vice president of Bualuang Securities, said the selling spree in banking stocks sprang from investors' anticipation of poor second-quarter bank earnings.

"Investors forecast that banks' earnings would be affected by the narrower net interest margin following the interest-rate hike and the end to the tax shields of some banks in the quarter," he said.

Macro Sucharitkul, president of JP Morgan Securities (Thailand), said the violence in the Middle East and the chronic political crisis in Thailand were the main culprits.

The sag in last month's consumer-confidence index to a fresh 50-month low reflects depleting purchasing power, he said.

Siriporn Chanjindamanee,

Oranan Paweewun

The Nation