SET index pierces 1,700 on trade fears

Local shares briefly slipped through the 1,700-point barrier yesterday in choppy trade on renewed worries over a potential global trade war, with US President Donald Trump set to approve new tariffs on Chinese goods.

The Stock Exchange of Thailand index is likely to fall further below 1,700 next week, said Nuttachart Mekmasin, executive director of Trinity Securities.

Investors are still fretting over the US Federal Reserve’s signalling of two more rate hikes this year, he said, and prompting foreign investors to adjust their portfolios.

“Foreign investors are reallocating their assets after the US central bank sent the signal,” Mr Nuttachart said. “The stronger US dollar clearly hit emerging currencies.”

The SET index, tracking declines in most regional stock market, started on a sour note and headed south to the day’s trough of 1,695.39 points before bounding back into positive territory on bargain hunting.

The index closed 0.3% lower at 1,704.82 points in brisk turnover worth 68.8 billion baht.

Foreign investors were net sellers of 7.47 billion baht. The SET index is down 2.8% year to date, still better than peers in the Philippines (-12%) and Indonesia (-5.7%).

In regional markets, Hong Kong stocks yesterday posted their biggest weekly drop in two-and-a-half months. The Shanghai Composite dropped to its lowest since September 2016, and the Kospi ended down 0.8%.

Japan’s Nikkei bucked the regional trend, closing 0.5% higher after the European Central Bank announced it would avoid raising rates until mid-2019.

The baht and South Korea’s won led declines against the US dollar.

The weaker currencies in emerging markets indicate fund outflows, Mr Nuttachart said.

“Thailand has fared better than the others [Indonesia and the Philippines] because the Thai market has strong domestic institutional investors which help absorb some impact from the foreign investors’ sell-off,” he said.

Despite the local institutional investors’ buying spree, the SET index will struggle to reverse the trend as long as foreign investors are still unloading Thai shares, Mr Nuttachart said.

He expects the SET index to move in a range of 1,680-1,730 points next week.

Trinity Securities views 1,700 points or below as the entry point for investors.

All eyes will be on the Opec meeting to see if the cartel’s members and Russia will adhere to commitments on production cuts, Mr Nuttachart said.