Fed rate fears spark SET correction
Foreign investors were the largest net sellers
The Stock Exchange of Thailand (SET) yesterday suffered a sharp correction as foreign investors were spooked by the possibility of a faster rate hike by the US Federal Reserve after January’s upbeat US employment and wage data.
The bourse opened the day at 1,798.42 points before recovering to close at 1,810.32. The SET declined by 0.93% in turnover worth 76.7 billion baht.
The benchmark yesterday hovered between 1,813.94 and 1,796.93 points.
Foreign investors were the largest net sellers of shares, worth 5.14 billion baht, while brokerage firms and institutional investors sold 1.3 billion and 298 million, respectively. Retail investors were net buyers of 6.73 billion baht worth of equities.
The SET’s plunge is in line with the tumble felt across Asian stock markets, with Japan’s benchmark falling by 2.55%, hitting a 15-month low, according to Bloomberg.
Asian shares dropped in response to the blue-chip Dow Jones Industrial Average falling on Friday by the most since June 2016, on the back of disappointing earnings from major US companies.
Strong wage growth and healthier hirings seen in the latest US non-farm payroll data also spooked investors regarding the possibility of a faster than expected Fed rate hike.
SET president Kesara Manchusree said the decline experienced by the Thai bourse is similar to falling shares experienced globally as major US companies’ earnings are lower than expected.
“It is a short-term panic [selling] period,” said Mrs Kesara, adding that the SET will remain an attractive investment destination if the US economic growth recovery is slow and the Fed delays its interest rate hike decision as a result.
The SET rose by 4.17% in January, with the bourse above the 1,800-point threshold, prompting investors to embark on a sell-off to turn a profit, she said.
“Thailand still has high growth and fundamental stocks, which investors can buy selectively,” said Mrs Kesara.
Thailand’s general election could occur next year, which would be a positive factor to invest in the SET in the medium- to longterm, she said.
As foreign investors embarked on an equity sell-off, they also sold short-term bonds worth 1 billion baht yesterday, while opting to invest in the dollar on the back of upbeat US non-farm payroll data, said a foreign exchange dealer at Bangkok Bank who asked for anonymity.
“Investors could hold onto the dollar in the short-term as there are still uncertainties regarding US political developments,” said the dealer.
Global stock markets may take at least one or two months to reach a new equilibrium, which stems from inflation expectations, said Visit Ongpipattanakul, managing director at Trinity Securities.
Mr Visit said the US 10-year government bond yield has climbed to 2.8-2.9% and this is the main factor inducing profit-taking behaviour on the US stock market, thus causing a correction across global bourses.
The US real interest rate, standing at 1.61.8%, means an inflation rate of 1.1-1.2% has been included. This reality is driving up the bond yield as US economic conditions continue to improve, he said.
For the Thai stock market, the government bond yield stands at 2.4-2.5%.
“This is the reason why Thailand’s stock market experienced a narrow correction compared with that of other bourses,” said Mr Visit.
“I’m not worried about the equity market, but the bond market, where foreign investors have been net buyers since last year. If they want to turn a profit, the bond market may face risks,” he said.