Friday, October 24, 2008

Thailand's Stock Market plumments to five year low


SET plummets to five-year trough

Panic selling from deep recession fear


Thai stocks nosedived 6.96% to a new five-year low as panic selling over recession fears gripped markets across the globe yesterday. The Stock Exchange of Thailand index closed at 432.87 points, down 32.37, in trade worth 12.6 billion baht. The index, now at its lowest since June 2003, fell through the 450-barrier within minutes of opening, and slid to as low as 426.52 in the afternoon before late bargain-hunting eased losses.

Losers outpaced gainers by more than 10 to one, with energy stocks leading trade down 7.5%, followed by banks with an 8.44% decline and tech stocks off 7.68%. Foreign investors were net sellers of 2.66 billion baht in stocks yesterday and local institutional investors had a net sell position of 171 million while local retail investors were net buyers of 2.83 billion.

The Thai market actually fared better than others in the region. Japan's Nikkei 225 fell over 10% to a five-year low after consumer electronics giant Sony Corp warned that profits this year would fall over 60% compared with last year due to the slowing global economy.

Korea's Kospi index lost 10.57% yesterday, while Hong Kong's Hang Seng dropped 8.3% and Singapore lost 8.33%. The sharp declines spilled over into Friday morning trade in Europe, with the Frankfurt, Paris and London markets all opening sharply lower.

Analysts said the selling came as top multinationals such as Sony, Toyota and Samsung reported weak third-quarter results and warned that profitability would further weaken due to the slowing global economy.

Weak employment data released by the US on Thursday also weighed on sentiment and added to fears that the global slowdown will be prolonged.

Thai stocks, which have lost half their value this year, are now trading at valuations of seven times earnings, with a majority of the companies on the exchange now trading below book value.

But Poramet Tongbua, head of equity research at Tisco Securities, said it was still premature to call this a bottom.

''Holding cash is best. The trend remains downward. We are in a global economic crisis, and it's very difficult to say when we can expect a turnaround,'' he said.

Veerachai Klangsamsri, research manager at Far East Securities, said announcements that leading US companies such as Goldman Sachs, General Motors and Microsoft were cutting jobs further added to investor pessimism.

The US economy is expected to show a contraction for the third quarter once data are released next week, he said.

Domestic political risk, a concern for investors throughout the year, had also increased after former prime minister Thaksin Shinawatra, now seeking asylum in London, was convicted by the Supreme Court for violating conflict-of-interest rules.

''We just can't predict where the SET index may end up. Investors should just hold cash,'' Mr Veerachai said.

Visit Tantisunthorn, the secretary-general of the Government Pension Fund, warned that the country's largest pension fund would post negative returns this year compared with a 9% gain in 2007.

He said principal contributions by its civil service members remained secure, adding that over the past 12 years, assets had doubled as a result of investment gains.

Mr Visit said the GPF had cut its domestic stock investments to just 8% of total assets from 11% at the beginning of the year. Foreign equity investments now stood at 7% to 8% of assets from 9% at the beginning of the year.

''We have divested a considerable amount of our equity position and raised our cash holdings this year,'' he said.

''We are a long-term investor. If you believe that the global economy will rebound in two or three years, then it makes sense to [invest in equities now]. But at the same time, the risks have certainly increased, and the fundamentals for 2009 won't be the same as this year.''

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