Strong fundamentals bring foreigners back to the SET

The Stock Exchange of Thailand Index gained more than 30 points as trading opened, and added another 62 points, or 4.42 per cent, at close. This helped narrow the loss from the previous three days when the index shed a total of 125.28 points. The index closed at 1,465.27 points on turnover of Bt64 billion, far below the 19-year high of 1,643.40 points recorded on May 21.

The Fiscal Policy Office chief yesterday said that capital outflows would be a short-term phenomenon while the Bank of Thailand viewed the Thai economic situation as solid, despite lower growth in the first quarter. Foreign capital outflows were attributed to the plunge on Tuesday and Thursday. According to Deustche Bank and Tisco Securities data, in June – until Thursday – the Thai market saw foreign outflows of US$1.406 billion, which boosted the year-to-date outflow to $1.79 billion. Thailand is second only to Korea in terms of funds outflows this year.

Foreign investors, who were net buyers on 13 of the previous 16 trading days, were net-buyers on Thursday and yesterday. After net purchases of Bt1.4 billion on Thursday, their purchases outpaced sales by Bt148 million yesterday. The sentiment on the Thai bourse improved along with those in other markets in Asia. Stock markets in Asia-Pacific rose by 1 per cent on average, as suggested by the MSCI index. According to Bloomberg, the gauge yesterday closed at the lowest since December 27 after dropping more than 10 per cent from a May 20 high. The index erased $1.06 trillion in value during that span through Thursday. 

Since May 22, investors expected a reduction in the US Federal Reserve’s asset purchases later this year and started to pull back money from emerging markets on anticipation of higher rates in the US. The US outlook suddenly improved while China’s growth rate may be lower than 8 per cent this year. 

The sentiment shifted again yesterday due to higher-than-expected retail sales in the US and lower unemployment claims, which could benefit exporters across the globe. Japan’s Cabinet yesterday also approved the Shinzo Abe government’s reform package, which would ensure further easing to end deflation. 

Despite the rebound yesterday, Tisco Securities revised down the SET Index target for 2013 from 1,650 points to 1,550 points. The expected shrinkage in the size of the US quantitative easing or an end of the QE, is one of the concerns, while political pressure could escalate in the second quarter.