Euro-zone fears hit equities, drive SET down 2%

The selling spree helped shove the SET Index down 21.54 points, or 2.03 per cent, to 1,040.83 on turnover of Bt22.1 billion.

The Stoxx Europe 600 had lost 3.83 per cent at about noon European Central Time. The FTSE 100 slid 2.05 per cent, Germany's blue-chip DAX 30 dropped 2.99 per cent and France's CAC 40 headed down 4.16 per cent.

Spain's IBEX-35 plunged 2.87 per cent and Italy's benchmark FTSE Mib plummeted 3.38 per cent. Futures contracts on the Down Jones Industrial Average expiring in December slid 199 points.

The International Monetary Fund and the European Union have held discussions with Greece on the progress of the country's austerity measures. Investors doubt that Greece will implement austerity moves fast enough to get a sixth payment from last year's ค110-billion (Bt4.5-trillion) bailout.

"Now it's already in a crisis with volatility," said Parson Singha, chief markets strategist at HSBC Thailand. "It's neither normal nor surprising. Markets, particularly interbank markets, will likely remain volatile in the next two to three months."

Veerathai Santiprabhob, the SET's chief strategy officer, said the exchange and the Association of Securities Companies had been monitoring margin loans on the SET and the futures exchange, while highly volatile stocks or stocks with irregular trading had also been followed. This was to maintain margin loans at proper levels and to cope with higher market fluctuations from the European debt problems.

He said there would likely be fewer sales by foreign investors than in late 2008 after the failure of Lehman Brothers Holdings roiled the markets, which saw foreigners' sales of Bt72 billion.

"The SET will mainly oversee criteria on risk management. Since the Lehman Brothers crisis, each brokerage has shared data on margin loans to prevent the overextending of margin loans on any specific stock," he said.

Teintip Subhanij, head of the SET's Capital Market Research Institute, said the European debt problem would likely affect the global economy in a way similar to the aftermath of the collapse of Lehman Brothers, causing high volatility on all stock markets across the world including Thailand's.

Investors have shifted from stocks to low-risk gold and government bonds. Gold for December delivery fell 1.7 per cent to US$1,828.80 an ounce in New York and domestic gold was down Bt50 per baht weight to Bt26,400.

Thawatchai Assawapornchai, head of research at Globlex Securities Co, said the SET Index edged down from the opening bell on concerns over deeper differences with the European Central Bank over the way out of the current debt crisis, which could delay solutions. Other worries include an unclear resolution for the world economy from the Group of Seven's meeting last week and US job-creation measures awaiting Congress' approval.

Investors should follow the US economic stimulus plan, which could be released after the US Federal Open Market Committee's meeting on September 20-21, Thawatchai said. However, mounting fears over possible downgrades of European banks and the euro-zone debt crisis could continue to pressure the SET Index.