Political turmoil lead to mayhem in Thai market

The composite SET index started the day with a sharp drop and headed further south to the day's trough at 527.70 in late trade before bounding back marginally to close at 528.71, or a 4.18 per cent tumble. The Thai stock market has so far lost 38.39 per cent this year.

Thoresen Thai Agencies (TTA) plunged 15.77 per cent to Bt18.70, Banpu dipped 13.66 per cent to Bt222, Bank of Ayudhya slumped 4.62 per cent to Bt12.40, PTT Exploration and Production was off 3.64 per cent at Bt106 and PTT was down 3.47 per cent at Bt195.

Other major stock markets in the Asia region also slid but at lower rates as investors hoped the US Federal Reserve and the UK central bank would follow in the footsteps of the Australian central bank by slashing their key interest rates.

The Nikkei 225 Stock Average dived 3.03 per cent to 10,155.90, its lowest close in almost five years, off 5.3 per cent. The Shanghai Composite Index closed down 0.73 per cent.

Kiatkong Decho, an analyst at SICCO Securities, said local politics cast a dark cloud over Thai shares and sent the stock market reeling.

"The local political situation overweighted foreign factor as witnessed by the fact that other stock markets in the region bounded back at the close while the Thai stock market kept falling," he said.

 The baht was volatile all day long yesterday, leading to a US$100million intervention by the Bank of Thailand (BOT).

It opened at Bt34.45Bt34.48 against the greenback before moving up relentlessly to the weakest point at Bt34.60 in the morning when police fired tear gas to disperse protesters. The local currency closed at Bt34.45Bt34.37.

A currency treasurer said the baht had been stronger after the BOT stepped into the forex market sporadically when the baht touched Bt34.50.

The source said the baht will move at Bt34.4034.60 today as the market had already absorbed the political turmoil, which is expected to ease partly.

The longterm yield curve in the bond market was up yesterday when investors unloaded the longterm bonds for the shortterm ones. Foreign investors have continued to leave the market, but in small amounts, leaving net foreign holdings of about Bt82 billion.

Nattapol Chavalitcheevin, president of the Thai Bond Market Association, said the investors always weighted on the shortterm bond when political tensions rose. As a result, the longterm bond yields increased slightly by 24 basis points.

He projected increasing demand in the shortterm bond, considered a safe haven when the stock market is bearish.

The cost of protecting Thailand's external debt from default rose to the highest in more than six years after police fired tear gas to disperse protesters at Parliament House, creditdefault swaps show.

Five-year creditdefault swaps on Thailand's debt were quoted 21 basis points higher at 206 as of 11.24am in Singapore, data compiled by Bloomberg show. The cost, which rises as perceptions of repayment ability deteriorate, is equivalent to $206,000 annually to protect $10 million in bonds.