SET slump won't last, BOT insists
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Declining Global oil prices are the main factor for the decline of Thailand's and many other Asian stock markets over the past two days, but authorities insist this was only a temporary reaction.
“This situation is normal in this period since stock markets in various countries have climbed contentiously, so there might be some correction according to the nature of the stock market,” Prasarn Trairatvorakul, governor of the Bank of Thailand, said yesterday.
Asian markets mostly slipped yesterday after sell-offs in Europe and the United States, as oil prices plunged to more than five-year lows and data indicated Chinese manufacturing activity shrank this month.
At the end of the year, foreign investors and asset-management companies are either about to go on vacation or have fixed their positions, Prasarn said. Trading will be thinner, so any movement in one direction will affect the bourse more than usual. The central bank is not worried, he said.
The SET Index plunged 138.95 points on Monday afternoon but staged a rebound yesterday to close at 1,478.49, down 2.5 per cent from Friday.
The Stock Exchange of Thailand has been heading south from 1,597.76 on December 4 to 1,461.74 as of 5pm yesterday.
As for the effect of lower oil prices on the money market, the baht has depreciated along with its peers in the region while the fluctuation and movements of the currency are normal, Prasarn said.
BOT spokesman Chirathep Senivongs Na Ayudhya said the central bank had assessed that the weakening of the currency was a brief abnormality and the baht’s movements and value had rapidly returned to normal while foreign funds were still interested in long-term investment in Thai bonds.
Prasarn recommended delaying the introduction of the revised guarantee act, which will limit the responsibility of loan guarantors. The new law is to go into effect on February 11.
The government should talk to all sides first before making any changes to the rules, he said.
Banks have warned the BOT that the new law will weigh on their decisions to extend credit to small and medium-sized enterprises, which usually turn to guarantees in place of collateral to gain loan approvals.
Isara Vongkusolkit, chairman of the Board of Trade, said local businesses needed plans in place to cope with tumbling oil prices and the decline of the stock market, as many of them would be affected.
Businesses that have been hit directly are restaurants, tourism operators and exporters because consumers in many countries may cut back on spending because of the lower oil prices and stock losses.
Local companies that are focused on exporting to oil-supplying regions such as the Middle East, Latin America and the Commonwealth of Independent States need to look for new markets, as purchasing power would be drained in those old ones.
However, shipments to other countries, mainly in Asean and other markets should increase, as they will have more left over to spend thanks to lower production and transport costs, he said.
