Monday, September 29, 2008

Thailand's SET drops as Big Mac crisis widens

Wisit Ongpipatkul of Tisco Research foresees lower US interest rates soon. PHAKRIT JUNTAWONG

Thai stocks nosedived 2.86% yesterday as Asian and European markets closed lower over growing fears that the US "Big Mac" crisis was spreading to banks across the world.

The Stock Exchange of Thailand index closed yesterday at 601.29 points, down 17.68, in trade worth 10.05 billion baht. Shares fell under the 600-point line to a low of 598.59 in the afternoon before rebounding slightly before the close.

Blue-chip stocks fared worse than the overall market, with the SET50 index off 3.37% on the day. Energy stocks led the market, dropping 3.39% for the day, while banks fell 3.7% and ICT stocks closed off 2.21%.

Foreign investors, net sellers of over 130 billion baht in stock this year, were net sellers of 1.3 billion baht yesterday.

The losses mirrored the rest of the region, with Hong Kong dropping 4.3%, Tokyo down 1.26% and Sydney off 2%.

Analysts said the expected passage of a $700-billion bailout package by the US Congress to buy bad debt from ailing banks did little to ease fears that the global economy is heading for a recession.

Reports that the Belgian-Dutch banking and insurance group Fortis and the British mortgage lender Bradford & Bingley both needed government intervention only added to fears that more banks could fail due to the ailing US economy.

The Hong Kong market was hammered yesterday as the leading Chinese insurer Ping An fell 10.5% on concerns about its exposure to Fortis. The Dah Sing Banking Group also suffered losses over concerns over its exposure to failed US bank Washington Mutual.

Wisit Ongpipatkul, an executive director and head of Tisco Research, said the US crisis would have a lasting impact on equity markets around the world.

The SET index, down 27.87% from January, was likely to recover by the second half of 2009 on the back of local investment flows, he said.

But the crisis would cut export growth for Thailand in 2009 and could result in local banks posting lower profits.

Tisco currently recommends investors hold up to 60% of assets in the money market, with the remainder split between high-dividend and fundamental stocks.

Mr Wisit said US interest rates were likely to be cut sharply over the next few months, possibly leading to a rate cut by the Bank of Thailand in 2009.

Tawatchai Asawapornchai, a vice-president at Globlex Securities, said fear of a US economic recession and tensions in the global financial sector were pressuring equity markets worldwide.

"We could see the SET index continue to drop this week. There just isn't any good news for investors now," he said.

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