FOREIGN capital is expected to move into the Thai bourse with the prospect of political clarity arising from the return of Prayut Chan-ocha as prime minister, the chief of the Stock Exchange of Thailand (SET) said.
SET president Pakorn Peetathawatchai said capital had already begun flowing into Thai stocks after a rebalacing by index compiler MSCI that had made them more attractive to foreigners.
That development, combined with the legislature’s vote for Prayut to keep his job and the increased likelihood that he can form a new government, will boost the confidence of foreign investors, Pakorn said.
Foreign investors have made net purchases of Bt29.64 billion in Thai stocks from May 28 to June 6, according to SET data. For the year to June 6, they made net purchases of Bt5.635 billion in Thai stocks, the data shows.
Separately, the stock exchange has been questioning its member brokerages in an effort to find deficiencies after a trading volume of as high as Bt200 billion was recorded on May 28.
Pakorn conceded that some brokerages had not been able to deliver securities on time, required under the SET’s T+2 schedule. He said that this problem was resolved on June 4.
The SET has been studying a plan to cope with any such situation which may occur in the future, he said, conceding that the exchange has never been confronted with a trading volume of as much as Bt200 billion in a day.
In response to a question on the naked short selling of stocks, Pakorn said that the exchange was looking into the situation and would fine those brokerages that failed to deliver purchased stocks within the scheduled time
“We expect to take a short time to carry out this examination. After that, we must look into the deficiencies uncovered, regarding who made mistakes and thus come up with prevention measures,” Pakorn said.
Viwat Techapoonphol, head of technical analysis at Tisco Securities, said that the SET Index is expected to swing in a range of 1,620-1,630 points in early June, before moving between 1,680 and1,690 points. The momentum could be driven by the formation of a new government.
On the other hand, gains in the SET Index could be constrained due to the US-China trade war and poor figures on key local economic gauges.
The building of mega-projects could also act as a spur for stocks, he said.
Globally, stocks may not drop sharply as bad news from the trade conflicts has already been priced in.
Additionally, the major central banks have begun more rounds of monetary easing. The Federal Reserve is expected to cut its benchmark interest rate by 0.25 of a percentage point at the Federal Open Market Committee’s June 19 meeting, he said, adding that it could follow that up with another rate cut late this year.
“If the Fed slashes its rate, the global liquidity will continue to flow into stock markets. But we want to warn investors to take caution in stock investments,” he said. “After the Fed’s estimated rate cut, for one to two days stock prices across the world could drop as the Fed’s rate cut will likely reflect the global economic slowdowns. But we’re not concerned over Thai stocks, thanks to clear political situation and domestic investment.”
The SET Index yesterday gained 4.95 points, or 0.3 per cent, to end at 1,653.41. Trading turnover was Bt49.88 billion.