CAPITAL FLIGHT
Investors also driven by more stable EU
Outflows are expected to continue this month amid improving odds of a US Federal Reserve rate hike in June.
Capital flight from the Thai stock market is expected to continue this month as the improving odds of a US Federal Reserve rate rise in June, easing geopolitical tensions and political stability in the euro zone drum up investor demand for riskier assets, stock analysts say.
The US dollar is in an upward bias against the baht, which is regarded by investors as a safe-haven asset, said Prakit Sirivattanaket, vice-president of Kasikorn Securities.
The political backdrop in the 19-nation euro-zone economic bloc has been deemed more stable after Emmanuel Macron won the presidential election in France, Mr Prakit said. Funds are being repatriated to developed markets, and emerging stock markets are gradually correcting downward.
“Funds are departing from asset havens, including Thai government bonds,” Mr Prakit said. “The Thai baht, which recently hit a 21-month high against the greenback, is experiencing a dearth of positive factors to support it further. It’s time for investors to profit as fund outflows threaten the market.”
Foreign investors’ net sales of Thai shares were worth 2.15 billion baht during the May 2-9 period, paring net buying to 5.94 billion baht year-to-date.
Listed companies’ earnings growth consensus has been revised down by brokers halfway through the first-quarter earnings season, creating another downward drag for the Thai stock market.
Kasikorn Securities cut the SET’s earnings per share growth to 3.3% this year from 5.3% but maintained the SET index forecast at 1,570 points by year-end.
The SET index may dive to as low as 1,530 points, the brokerage said.
The benchmark index fell by 0.5% to 1,560 points on Tuesday.
Kasikorn Securities recommends a selective buying strategy focused on energy, construction and stocks, which are expected to benefit from the weakening baht.
Asia Wealth Securities’ managing director for the research department, Warut Siwasariyanon, said Mr Macron’s victory on Sunday eradicated political risks in the euro zone, and this could prompt the European Central Bank to begin tightening its monetary policies amid improving prospects for the economy and corporate earnings in the bloc.
“This raises fears of capital flight from emerging markets,” Mr Warut said.