The Stock Exchange of Thailand (SET) and other Asian bourses were broadly up yesterday in early trade on the expectation that several central banks will follow the Bank of England's move by injecting liquidity to shore up their currencies, according to analysts.
The SET Index, together with bourses in Singapore, the Philippines and India, moved to green territory in early trade the day after the Bank of Thailand lifted the Thai interest rate by 0.25%, in line with market expectations.
The Thai bourse dipped to negative terrain in afternoon trade yesterday after posting a loss of 0.7% on Wednesday, staying below the 1,600-point plateau.
Analysts recommend investors buy banking stocks, which are expected to benefit from higher interest rates and net interest margins. Commercial banks, starting with Bangkok Bank (BBL), are raising their rates, which should result in higher profit margins.
The Bank of England said on Wednesday it would buy as much as £5 billion a day of long-dated government bonds until Oct 14.
Other central banks also signalled their willingness to step in and stabilise currency fluctuation. The Bank of Korea, for example, revealed a plan to buy back government bonds. These moves are expected to reduce appreciation of the dollar index in the near term, said Asia Plus Securities.
Land & Houses Securities predicts other commercial banks will follow the lead of BBL. The brokerage expects commercial banks' net profit in the third quarter to increase 23% year-on-year to 44 billion baht, with state-owned Krungthai Bank (KTB) posting the highest growth.
Finansia Syrus Securities (FSS) said global stock markets reflected positive sentiment after the Bank of England announced a bond purchase to curb currency volatility, pushing bond yields lower. The US 10-year bond yield, which hit 4% in the previous session, fell to 3.74% overnight, and a weakened dollar index supports fund flows to risky assets. Yet FSS does not foresee the recovery lasting long.
