ECONOMISTS BELIEVE that systemic risk from market correlation has been lowered since the last financial crisis, while the most apparent potential market changers for the Stock Exchange of Thailand are a faster-than-expected increase in US interest rates a
Speaking at the Capital Market Research Institute’s monthly “Capital Market Research Forum”, Aphichat Wisitkitchakarn, economist at Tisco Financial Group, said that since the Asian financial crisis in 1997 and the Lehman Brothers triggered crisis in 2008, correlation among East Asia’s capital markets had reduced.
“The correlation risk from financial institutions on the SET was driven higher at the beginning of the tapering of the US quantitative easing, but since 2012, the effects of QE tapering have mostly been absorbed by capital markets in the region. The SET is moving more in line with the country’s own sectors and economy, while share prices are reflecting internal factors more than moving along the line of regional indices,” he said.
Man Juttijudata, senior director of investment risk management at the Government Pension Fund, said the Thai fixed-income market’s yield curve had decoupled from the US market since the 2008 crisis because Asia’s markets are now focused more on domestic rather than external factors.
“Since the global financial crisis, Asian markets have begun to have more freedom to manage their own short-term policies, while the interest rates in the region have begun to reflect domestic economic activities and national inflation rates more than the interest rates of developed countries. This has led to decoupling from developed [markets] such as the US,” he said.
He explained that Asia’s current-account deficits and public debts were lower, which made its fixed-income markets more attractive than before. Meanwhile the movement of exchange rates in the region is no longer “bipolar” but “tripolar” – influenced by the US dollar, other developed-market currencies, and currencies of emerging markets in Asia.
Adisorn Rotjanapan, senior vice president for risk management at BBL Asset Management, said fluctuations in external markets from factors such as geopolitical risks were more apparent in stock markets in Asia than correlation and systemic risks because the spreading of market risks in Asia was now more widespread than in 1997 or 2008, and the markets were now more aware of such crises than before.
“Currently I cannot see any apparent risk to the capital markets in Asia, including Thailand, apart from the geopolitical risks in Europe and the Middle East, which we have to keep an eye on. Meanwhile the internal risk factors in the country have already been absorbed by the market,” he said.
Geopolitical risks could drive the US Federal Reserve to increase its key interest rate faster than expected in the first or second quarter of next year, and an apparent recovery of the US economy and unemployment rate could lead the Fed to make the same decision, he said.