Shares lost 1.44 per cent yesterday, their biggest fall since early January,  because of two main factors.

There is mounting nervousness over possible unrest after the Constitution Tribunal rules next week on whether the two main political parties will be dissolved.

This was coupled with a regional stock market slump.

The Asian stocks retreat was triggered by former Federal Reserve chairman Alan Greenspan's remark on the chances of a "dramatic contraction" in Chinese markets.

Jakarta dived 1.22 per cent, Singapore closed down 0.8 per cent and Kuala Lumpur was off 1.03 per cent.

The Thai bourse was the worst performer in the region. It dropped as soon as the curtain was raised and headed south to the day's trough of 719.56 before slightly bouncing back to close at 720.72.

Foreign investors remained buyers with a net purchase of Bt1.78 billion, while local institutional and retail investors dumped Bt1.29 billion and Bt493.52 million net.

Energy and banking stocks were the hardest hit. Thai Oil plummeted 4.35 per cent to Bt66, PTT Exploration and Production was down 1.98 per cent at Bt99, Siam Commercial Bank slipped 2.26 per cent to Bt65 and Thoresen Thai Agencies gave up 3.33 per cent.

Puwadol Lapudomsuk, investment strategist for Asia Plus Securities, said reports about the dissolution of the two major political parties - Thai Rak Thai and Democrat - and another coup,  as well as profit-taking were to blame for the sharp decline in the bourse.

The selling spree by local institutional investors was prompted by the redemption of unit trust holders following a 40-point rise in the SET Index, he said.

Veerachai Krongsamsi, investment strategist for Far East Securities, said investors cleared out their positions on anxiety that violence might erupt after the court ruling. The Constitution Tribunal will hand down its decision on election fraud cases next Wednesday.

"Investors took profit to reduce risk and slow down investment in big market capitalisation stocks including energy, banks, property and contractors. These share prices increased significantly and there is minimal upside gain," he said.

Adkinson Securities' senior analyst Ronnakrit Sarinwong said the political issue would be the main factor in dictating the direction of the stock market next week.

He suggested investors start unloading shares when the SET index falls below 725 points.

"The SET index may pull off some rebound on Friday, as the ability to end above 720 today is a positive technical sign. But any gain will be limited, may be to five points, as political uncertainty still clouds the market," an analyst at DBS Vickers Securities told Dow Jones Newswires.

"Sentiment turned very negative after Greenspan's comments," Chai Chirasevenupraphand, a market strategist at Capital Nomura Securities, was quoted as saying by Agence France-Presse.

In a speech at a conference in Madrid, Greenspan said he feared a "dramatic contraction" in booming China stocks, which have jumped about 55 per cent since the beginning of this year.

Siriporn Chanjindamanee

The Nation