The Stock Exchange of Thailand (SET) index slipped below 1,500 points in early trading hours yesterday, then traded near the 1,500-point mark for most of the day as foreigners continued to sell Thai shares amid interest rate hikes and political uncertainty.
The index dipped to a low of 1,495.82 points 15 minutes after trading started on Friday, down from Thursday's close of around 1,509 points -- the lowest in more than two years. The index then rebounded and finished at 1,506.77 points by midday.
The baht traded at a three-month low of 35.25 to the dollar and was set to end the week 1.7% lower, the worst weekly fall since mid-February. The baht fell 0.4% after the Bank of Thailand said its policy rate was not yet at a "neutral level" and that it would focus more on medium-term economic data.
Nutt Treepoonsuk, a strategist at Yuanta Securities Thailand, said the decline was also fuelled by falling oil prices as Brent crude dropped by 3.86%. Volatility was added by Stark Corporation and other medium-sized and small-cap stocks that have shaken the confidence of foreign traders, who have already divested Thai stocks amid domestic political uncertainties.
"Those foreign and institutional investors have no reason to hold mid-sized to small-cap stocks in Thailand. But I do believe if the political situation stabilises, the index could comfortably rebound to trade at more than 1,500 points," said Mr Nutt.
Asia Plus Securities (ASPS) said the SET index was still pressured by fundamental factors, while the baht depreciation weakened fund inflows.
"Fund inflow has not returned yet, while the Thai currency weakened to 35 baht to the greenback, reflecting that confidence has not returned and was weakening the SET index," the brokerage said in research yesterday.
As the Bank of England lifted interest rates more than the market expected, up by 0.50% on Thursday, the US Federal Reserve confirmed it would keep raising rates until core inflation was tempered.
The Fed temporarily paused its interest rate hikes last week.
Fed chair Jerome Powell told the Senate Banking Committee that two more rate hikes would probably be needed this year.
Fund flows into safe US assets continued, pushing up bond yields and the US dollar. The dollar appreciation has weakened the baht and triggered fund outflows from Thailand.
"Due to concern over Bank of England and Fed rate hikes and a US recession, fund flows switched to safe assets, so the baht has weakened," said ASPS.
"We recommend stocks benefiting from the weak baht that may outperform the SET amid fluctuations."
The SET index closed yesterday at 1,505.52 points, down 0.25%, in trade worth 46.8 billion baht.
