Thai stocks rise on Bernanke statement but risks remain
Play
Thai stocks surged yesterday after US Federal Reserve chairman Ben Bernanke said the central bank had no plan to wind down its stimulus until the economy was back on track, but global uncertainties and domestic concerns could still weigh on the Thai outlo
The Bank of Thailand is scheduled to release its new 2013 economic growth forecast today, which is widely expected to be lower than the previous 5.1 per cent.
Riding on a burst of euphoria, the Stock Exchange of Thailand surged 29.11 points or 2 per cent to 1,487.19 on turnover of Bt57 billion. Still, Finansia Syrus Securities warned in a research note that despite the better near-term investment sentiment, long-term risks that the market is well aware of still abound, such as a dial-down of the United States’ quantitative-easing (QE) programme and the softening Chinese economy.
“Meanwhile, local factors in the second half look set to be more negative to investment sentiment than those in the first half. Paramount to this is political complications, which the market remains gravely concerned about,” it said.
Foreign investors were net buyers, boosting month-to-date net-buys to Bt2.6 billion. They were still net buyers yesterday for the eighth straight day, scooping up US$423 million (Bt13.1 billion) worth of stocks. As of Wednesday, Taiwan marked the largest net-buy of $233 million, for the seventh straight day, with South Korea following with $125 million for the fifth straight day. Indonesia reversed itself with a net-buy of $14 million.
While foreign investors may resume selling Thai shares if the outlook for QE dims, according to Asia Plus Securities, local institutional investors could also sell in the long term. Lack of support from new funds and LTFs (long-term equity funds) that reached maturity are likely to make these investors continue to unwind their positions.
In semi-annual testimony to the US Congress on Wednesday, Bernanke opened the door to a delay in reducing the Fed’s bond-buying programme, saying it would depend on data that economists say are falling short of the central bank’s own forecasts. A Fed survey released on Wednesday cited 11 of the its banking districts reporting “modest to moderate” growth, while Dallas reported “strong” growth for the second straight survey. “Bernanke doesn’t seem to be in a hurry to taper,” said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York, who formerly worked for the New York Fed.
“The probabilities of a September taper have come down,” he told Bloomberg.
Splits over the state of the global economy as emerging markets cool off will be one of the main subjects at the meeting of G20 countries today and tomorrow.
