Pakorn says Thailand’s fundamentals sound but market reacting to us rate worries and looming trade war.
The current large capital outflows from the Stock Exchange of Thailand is not unusual in the short term while economic fundamentals remain sound, said Pakorn Peetathawatchai, the newly appointed president of the SET.
Foreign investors have sold Thai shares worth about Bt180 billion since the beginning of this year. Many believe that the investors were mainly worried about rising US interest rates and looming trade wars. Some critics also believed that an unclear political direction was one of key factors driving investors away.
“The market has been affected by external factors which we cannot control,” Pakorn told Nation Multimedia Group in an exclusive interview.
He said the SET Index had risen about 10 per cent each year for the past two years, supported by strong economic fundamentals
Foreign investors this time had made net sales of about US$5 billion to $6 billion, which is lower than the net sales of $8 billion three years ago, he said.
The fundamentals have not changed but market sentiment is changing due to fear of a US rate hike and the impact of trade tensions, he stressed.
Other stock markets in the emerging economies had suffered even more from capital outflows than the SET, he said.
When talking about scale of outflows, people should think about the volume of daily trade.
The volume of daily trade has almost doubled this year to about Bt60 billion from Bt30 billion in the past, so it is natural that the scale of outflows would also be larger, he noted.
Analysts at Asia Plus Securities predicted that in the case of worse scenario of trade war if the US imposes high tariff rate on US$200 billion worth of Chinese goods, the Thai index could plunged to below 1,500 points next year from this year’s target of 1,771.
Prinn Panitchpakdi, managing director at CLSA Securities Thailand, however, was optimistic saying that current stock values are attractive for investment. He expected market would rebound in some times. He said investors were worried too much about impact of the trade war and rate hike.
“It is a crisis of confidence,” he said.
He added that internal factors could boost market sentiment. “If the government could set a clear date for the general election, and lift the political ban, it would boost confidence,” he assured.
Moreover, if the planned large infrastructure projects in the Eastern Economic Corridor progress quickly enough, then it would bring more investment into the Thai stock market, he said.
Kobsidthi Silpachai, head of Capital Markets Research at Kasikornbank, shared a similar view saying that investors fear the trade war will get of control.
“Markets are functioning on fear rather than greed or fundamentals,” he said. Capital outflows from the Thai equity market, monthtodate, was $1.58 billion, compared with $371 million, and 262 million from Indonesia and the Philippines respectively, he said.
In bond markets, Thailand experienced inflows of $249 million, but Indonesia and the Philippines suffered outflows of $22 million and $290 million respectively.
According to the SET data, the SET Index dropped by 10.39 per cent in the past three months and slid 8.79 per cent since the beginning of this year to 1,595.58 on Friday. The capital outflow was attributed to the weakening of the baht, which fell to an average Bt33.166 per dollar on Friday from Bt32.434 on January 3, according to the Bank of Thailand.
As of Friday, the baht had weakened by 1.64 per cent against the US dollar, while the Indonesian rupiah was down 4.84 per cent, the Philippine peso was down 6.54 per cent and the Chinese yuan by 1.74 per cent since the beginning of this year, said Kobsidthi.
Investors are also worried that China would devalue the yuan to absorb the impact of the trade war. A move by China would lead other emerging economies to also depreciate their currency value in order to maintain their competitiveness, like the market turbulence in 2015, he added.