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Published on February 1, 2008

After several days of international turmoil, the Stock Exchange of Thailand managed the biggest gain of the regional markets.

The good news came on the back of the US Federal Reserve's 50-basis-point cut and the imminent announcement of a Cabinet line-up.

Analysts warned investors not to be too bullish because of lingering US sub-prime woes and the danger of a US recession.

Foreign investors, who had been furiously unloading stocks around the world, yesterday snapped up Thai shares, in the process recording a net gain of Bt3.78 billion, the biggest one-day buy of the year. The gain is in stark contrast to the negative sale of Thai shares so far this year of Bt35.16 billion.

The SET index yesterday started with a minimal drop but then surged ahead on the foreign investors' buying spree. At one point it was up by 3 per cent, but then weakened slightly to close at 784.23. Shares worth Bt33.87 billion were traded.

The mood on the SET also affected the baht which yesterday marked a fresh 10-year high. It opened at Bt33.01-Bt33.02 to the dollar and closed at Bt33.02-Bt33.04. Currency traders said the Bank of Thailand stepped into the foreign exchange market to prevent the baht breaking through the Bt33 level.

Securities Analysts Assoc-iation secretary-general Sombat Narawutthichai said the Fed rate cut would boost the Thai bourse. But it would be short-lived as the sub-prime crisis remained and investors will be closely watch the new Cabinet line-up.

The Fed's 0.5 per cent policy rate cut came after the surprise 0.75 per cent cut last week. Economists forecast a further rate cut.

An ACL Securities analyst said there was more optimism over the health of the US economy after the rate cut.

Another analyst said the SET was now attractive with good dividend returns and cheap valuations.

But the news was not all good for home-owners. Government Housing Bank president Khan Prachuabmoh said the domestic mortgage rate might not drop as fast as in the US.

He expected the Bank of Thailand to lower its one-day repurchase rate by 25 basis points to 3 per cent at its next meeting.

The US Federal Reserve cut its policy rate by 1.25 per cent in a bid to ward off economic recession.

"I don't think we're facing trouble as serious as in the US so the central bank may only cut [its rate] by 25 basis points at the next meeting," Khan said.

He said the central bank planned to issue bonds worth Bt50 billion with a coupon rate of between 3 and 4 per cent, indicating that lending rates would remain high. Competition among commercial banks for deposits was another sign the lending rate would not fall quickly.

The GHB also planned to raise funds worth Bt5 billion through a bond issue and he wanted the new government to guarantee the bonds.

If the government did not, the GHB bonds would be about 50-60 basis points higher than the government bonds, he said.

 Siriporn Chanjindamanee,

 Wichit Chaitrong

 The Nation