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Published on July 28, 2007

The mounting anxiety over possible violence during protests over the long holiday weekend and the flight from stocks to bonds following the record high in regional bourses also triggered the sell-off.

The SET Index started trading with a tumble and headed further south to close at 863.58 points. At one point, it slumped 3.4 per cent to the day's trough of 854.07. Turnover was brisk at Bt34.87 billion.

PTT fell 3.01 per cent to Bt322, PTT Exploration and Production lost 3.70 per cent at Bt130, Bangkok Bank shed 2.29 per cent to Bt128, Siam Commercial Bank dropped 3.01 per cent to Bt80.50 and Thai Oil slumped 2.19 per cent to Bt89.50.

The Weighted Price Index of the Taiwan Stock Exchange took the heaviest blow in the region, sinking 4.2 per cent. The Straits Times Index registered its biggest single-session loss of this year at 2.4 per cent, and the Nikkei-225 index gave up 2.36 per cent.

The Dow Jones Industrial Average fell 2.3 per cent for its biggest one-day percentage drop since February 27, while the Nasdaq Composite Index retreated 1.8 per cent. The backdrop was again concern over the impact of the US sub-prime housing crisis on other credit markets and the wider financial system.

Visit Ongpiattanakul, deputy managing director of Trinity Securities, said high returns from the recent rally in stock markets across Asia had prompted foreign selling pressure.

"We can see signs of a shift from stocks into bonds from the increase in bond spreads in emerging and developing markets from 1.5 per cent to 2.25 per cent, as foreign investors want to limit their risk from stocks. This pattern is the same as it was in June 2006, when the SET Index fell 100 points," he said.

More evidence is the yields in the US bond market, which have risen sharply, he said.

Investors should be more prudent, especially stock investors, and they must keep an eye on foreign investors to see if they continue to unload Thai shares, he added.

Adisak Kammool, vice president of economics and strategy research at KGI Securities, rushed to soothe market jitters by saying the steep plunge yesterday did not surprise him.

Foreign investors who had held on to shares for one to three years unloaded them across the world following disappointing market performances, he said.

"If the SET Index cannot rebound significantly, it will dive further to 820 points," he said.

"The sharp declines in regional bourses took centre stage today," said another analyst at KGI Securities.

 Bargain-hunting in late trade, thanks to the Bank of Thailand raising economic-growth forecasts, helped the index recover from the day's low, he added.

Siriporn  Chanjindamanee

The Nation