Tuesday, September 2, 2008

Thailand's SET investors rush for emergency exit

NUNTAWUN POLKUAMDEE

Thai stocks fell 2.33% yesterday as investors fled to the sidelines after the government imposed a state of emergency.

The Stock Exchange of Thailand index closed at 659.51, down 15.71, in trade worth 12.6 billion baht, about 30% off normal levels but double the previous day's turnover.

SET president Patareeya Benjapolchai said the market response to yesterday's government decree was restrained, as political risk and tension had been building for four months. Since the beginning of the year, the SET has fallen 21%, largely due to political strife.

She acknowledged that political tensions would undermine investor sentiment, with two companies _ Jay Mart and Siam Global House _ already expected to delay listing plans due to the weak market.

The SET, meanwhile, said it would continue with its Thailand Focus Forum conference with the broker CLSA on Sept 17-20, featuring addresses by the finance, industry and commerce ministers to hundreds of foreign investors.

But M.L. Thongmakut Thongyai, head of equities at Citicorp Securities and president of the Foreign Brokers Association, said foreign investment in Thailand would certainly slow with the formal announcement of a state of emergency.

''Foreign investors will delay investment in the country _ they dislike any thought that the army is involved in the country's management,'' he said.

Pichai Lertsupongkit, a market strategist at Thanachart Securities, said politics was the main factor driving the direction of the market.

He agreed that foreign investors, who have been net sellers of nearly 100 billion baht in stock this year, would stay away from the country for now.

''The question is whether the risks are greater than the potential upside. Many are just taking a wait-and-see approach,'' Mr Pichai said.

Voravan Tarapoom, chairwoman of Asset Investment Management Company, expressed sadness at Thais fighting among each other.

''We can only hope that negotiations will help end the problems. But it may be too late, and the situation has already undermined tourism and investment for the country,'' she said.

Anuwat Ruamsuke, director for equity capital markets at Phatra Securities, said the emergency would lead institutional investors to delay new investment.

He noted that the announcement yesterday by the Election Commission that it would recommend dissolution of the People Power Party placed more pressure on the government.

''We can only monitor the situation closely. There could be more violence even with the state of emergency,'' he said.

''The state of emergency is negative for the baht,'' added Sebastien Barbe, a strategist in Hong Kong at Calyon, the investment banking unit of Credit Agricole.

''The economic fundamentals aren't supportive of the currency. You have a slowing economy, slowing domestic demand and real interest rates are now negative.'' The baht may fall to 35.80 by the end of the year, he said.

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