Peaceful protests boost stock market

Thai shares yesterday rallied 3.56 per cent, the largest single-day surge in five months, as hedge funds unwound positions in hopes there will be no violence at the anti-government protest.

The Stock Exchange of Thailand (SET) Index moved narrowly throughout the first trading session yesterday before rebounding strongly late in the afternoon trading session to close at 768.9 points.

Even though foreign investors sold shares with a net position of Bt2.2 billion, there was a buying spree through foreign brokers including Goldman Sachs, SG Warburg, UBS and Nomura Securities, said a source at a foreign brokerage.

The pattern of buying - fast and at every price - indicated hedge funds as general foreign investors do not have this buying nature, he said.

The buying spree was aimed at covering their recent short positions, as they bet there would be no violence at the protest by the People's Alliance for Democracy and that the US Federal Reserve would leave the key interest rate unchanged in next week's meeting, the analyst said.

Buying to cover short will continue over the next one or two trading days, he said.

The Thai stock market has plunged 13 per cent from the year's peak of 884.19 points, and foreign investors have been net sellers, with a cumulative amount of over Bt40 billion so far this year.

Kasem Prunratanamala, head of Research at CIMB-GK Securities (Thailand), said foreign investors would buy Thai shares to cover their short position as they anticipated the protest would pass peacefully and this boosted the market.

Foreign investors who have serious intentions will not return to the Thai market soon as local politics are still uncertain while the risk of external factors remains, he said.

An analyst at a local brokerage said if the protest remained peaceful over the weekend, the SET Index would jump sharply. But if there is violence, panic sales will erupt, and this will cause turmoil next week. The resistance level is 780 points and the support level 728 points, he said.