Thursday, October 22, 2020

Slow economic recovery expected to trigger exodus of foreign investors from stock market

Sep 30. 2020
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By The Nation

Foreign investors are expected to make net sales in the Thai stock market of Bt300 billion to Bt350 billion this year from the current Bt273 billion due to the slowdown in the country's economic recovery, Krungthai Bank said.

Krungthai market strategist Poon Panichpibool expected another Bt30 billion to Bt50 billion of foreign funds to flow out of the Thai stock market if economic recovery is slow.

He said this phenomenon would happen if there were a second Covid-19 outbreak in Thailand, the government's travel bubble scheme fails to attract tourists or foreign investors wait to buy Thai bonds with interesting yields.

"However, foreign investors would make net sales in Thai stocks of only Bt275 billion to Bt300 billion this year if economic recovery is speeded up by the success of the travel bubble scheme, and Bt30 billion of foreign funds would flow into the stock market," he said, adding that the production and distribution of Covid-19 vaccine would boost economic recovery.

"Meanwhile, the Thai bond market would not benefit much from the abovementioned positive sentiment because foreign investors would be more cautious about buying long-term bonds whose yield depended on the economic direction and inflation."

He said more than Bt320 billion cash recently flowed out of the Thai stock market of which Bt270 billion was foreign investors' funds as they believed the Thai economic outlook was still gloomy and there was no sign of a tourism recovery.

"Meanwhile, foreign investors' funds began to flow into the Thai bond market after facing mass sell-offs worth Bt150 billion in March, as Thai bond yield was currently high compared to the US and European bonds," he said.

He expected foreign funds to flow back into the Thai capital market with at least Bt100 billion this year from the recovery in the global and Thai economy and distribution of Covid-19 vaccine in the later part of this year.

On Tuesday, foreign investors made net sales of Thai stocks totalling Bt1.48 billion, while net sales since the beginning of this year increased to Bt273 billion.

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