The stock market is expected to slide 2-3 per cent if trading resumes today, following the riots as well as more bad news from overseas, which could drive away foreign investment at least until the fourth quarter, stock analysts said last week.
The Stock Exchange of Thailand's market capitalisation shrunk by Bt175 billion to Bt6.17 trillion from April 10-19, as violence hit Bangkok.
From April 12 to Wednesday, the last trading day last week, foreigners dumped shares to the tune of Bt46.43 billion in net sales.
Pateera Dirokrungtheeraphob, president of the Association of Securities Companies, attributed the sell-off to the shocking violence.
This will have an enduring influence on market sentiment, and foreign investors would likely keep reducing their net position, though all shares would not be unloaded at once, due to the steady sell-off in the past weeks.
watching closely
Domestic and foreign investors now are watching intently what remedial measures the government comes up with, particularly for industries like consumer products, financial institutions, tourism and services.
"The violence was greater than expected. However, foreigners have sold huge holdings. Thus, heavy sell-offs are not in the picture. However, local institutional investors may follow suit, as they may adjust portfolios. Analysts may also need to review the market outlook," Pateera said.
Thailand's economic image can still be restored with cooperation from all parties, he said, adding that economic fundamentals remain strong.
Kavee Chukitkasem, assistant managing director of Kasikorn Securities, expects the SET Index to witness a 2-3-per-cent drop from its May 19 closing of 765.54 points.
Besides the domestic violence, the market could react to global factors as Wall Street softened 2-3 per cent from Thursday to Friday when the local market was closed.
Of prime concern for local and foreign investors is whether the rioting is actually over, after the anti-government protesters had dispersed.
"Now, foreign sell-offs should not be a point of concern here, following the sell-offs," Kavee said.
Local institutional investors could take the lead in retreating from the market, he said.
"As the protest ended in a way that affected the overall economic picture, fund companies could unwind 5-10 per cent of their portfolios. Shares worth billions of baht will be sold," he said.
The market now enjoys no positive news. As many risk factors prevail, the SET could fall further to 730 points, he added.
Therdsak Thaveeteeratham, head of research at Asia Plus Securities, said that while the political situation is clearer to some extent, the market, particularly energy stocks, will suffer from global concerns over the euro zone's public debts and the US economy's fragile recovery.
He sees the SET Index standing at 754-755 points at year-end, as the gross domestic product growth forecast backtracks to 3 per cent with listed companies' earnings growth of 13 per cent.
"Foreign investment for medium- and long-term gain will not return to the market for at least three months," he said.