By WICHIT CHAITRONG
THE STOCK EXCHANGE of Thailand Index plunged 2.26 per cent yesterday, closing at 1,682.89 points, in keeping with trends across Asia following the tumbling of the US stock market on Wednesday night.
Foreign investors dumped Thai stocks worth Bt10.6 billion in a single day of trading yesterday.
However, the Thai bond market has become a safe haven for investors amid equity sell-offs worldwide. Foreign investors this year poured Bt113.4 billion into the bond market, in contrast with the Bt239.3 billion year-to-date outflow from the stock market.
The sharp fall prompted the SET to issue a statement aimed at calming market sentiment.
SET president Pakorn Peetathawatchai said the fall in Thai shares yesterday was triggered by external factors and the slump was comparatively lower than in most markets in the region.
“It is only short-term volatility as Thailand’s economic fundamentals are sound, the performance of listed companies remains good and their financial positions are strong,” he said.
He suggested that investors should consider investing in companies with strong fundamentals and with potential for growth in the future. Investors are advised to closely follow latest developments in the country and overseas, in order to be well prepared for the changing market environment, he added.
Pipat Luengnaruemitchai, assistant managing director at Phatra Securities, said the 3-4 per cent US market fall had sparked the global market flight. Looking ahead, there are a lot of headwinds, as investors are afraid of the impact of the trade war on the global economy, high inflation in the US, jump in US Treasury yields and signs of slow growth in US corporate earnings. AFP reported that Tokyo’s benchmark index closed down nearly 4 per cent yesterday, as US President Donald Trump said the Federal Reserve had “gone crazy” with plans for higher interest rates.
The Nikkei 225 index plunged 3.89 per cent, or 915.18 points, to end at 22,590.86, while the broader Topix index shed 3.52 per cent, or 62.00 points, to 1,701.86. Chinese stock markets plunged to their lowest levels in four years.
The benchmark Shanghai Composite Index dropped 5.22 per cent, or 142.38 points, to 2,583.46, marking the lowest level since November 2014.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, plummeted 6.45 per cent, or 89.15 points, to 1,293.90, the lowest point since September 2014.
While foreign investors were net sellers of Thai shares worth Bt10.56 billion yesterday, they bought Thai bonds worth Bt4.85 billion on the same day.
“Thai bonds have become a safe haven for investors due to the stronger economic fundamentals when compared with other emerging countries which mostly suffered from capital outflows,” said Tada Phuttitada, president of the Thai Bond Market Association (ThaiBMA).
Foreign investors continue to buy Thai government bonds and bonds issued by the Bank of Thailand. “Thai bond yields have started to rise with US bond yields, but the unusual thing is that the Thai bond yield is lower than the US; for instance the 10-year Thai bond yield was 2.84 per cent, against the US Treasury yield of 3.22 per cent. Usually, the bond yields of developing market such as Thailand would be higher than a developed market such as the US,” said Tada. The Thai bond yield has been lower than the US Treasury since the fourth quarter of last year.
It is because the market believes the US economy has peaked and would slow down in later years, Tada said.
Inflation in the US in the next 10 years might be higher than the inflation rate in Thailand. Inflation in the US is currently at about 2 per cent compared with 1.3 per cent in Thailand, making the real value of Thai bond higher than the US Treasury and making Thai bonds attractive for investment, said Ariya Tiranaprakit, executive vice president of the ThaiBMA.
The increased in tariffs on Chinese goods by the Trump administration has partly contributed to the increase in inflation in the US. The US tax cut also contributed to the rapid rise in inflation.