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MARKET

Foreign sell-off of stocks not expected to be as bad as in 2008

By Siriporn Chanjindamanee

The Nation

Nervous foreign investors have opted to sell Thai stocks worth Bt19 billion over the past four trading days on growing concern over the US economic outlook and the euro-zone debt crisis, but the situation is expected to be less severe than during the 2008 sub-prime crisis.

Gold soared to record levels and crude prices fell yesterday.

Immediate-delivery gold rose 3.1 per cent to an all-time high of US$1,772.38 (Bt53,038) an ounce, causing the Gold Traders Association to adjust the price of domestic gold bar 19 times to end the day at Bt25,100 per baht weight.

Oil dropped below $80 a barrel on the New York Mercantile Exchange, the lowest level since September 29 last year, according to Bloomberg.

"Foreigners were net sellers [of equities] for the past two to three days as they are concerned about the US and European economies.

"Their panic selling followed the United States' debt downgrade, but is expected to be less severe than the sub-prime crisis in 2008 due to Thai economic fundamentals and the high amount of global funds," said Veerathai Santiprabhob, chief strategy officer at the Stock Exchange of Thailand.

"If the funds do not flow into the US and Europe, they will likely come to high-growth countries, including Thailand. Earnings growth is likely to be relatively strong," he added.

The local bourse was very volatile yesterday, with the SET Index plunging sharply at the market's opening in reaction to stock tumbles in the US and Europe linked to the US sovereign-debt downgrade by Standard & Poor's.

During the afternoon session, the index rebounded slightly to close 3.31 per cent, or 35.65 points, lower at 1042.54. Foreigners were net sellers of stocks worth Bt9 billion.

Veerathai said the obvious conclusion to draw was that the capital could flow into government bonds, instead of stocks, with about Bt600 billion having gone into bonds since the beginning of the year, compared to Bt300 billion for the whole of 2010.

Amid investors' concerns about the strength of the global economy, central banks holding the US dollar as reserves may diversify their assets following the greenback's weakening, and that could drive up the value of currencies and other assets, including gold, and negatively affect oil prices, he said.

The baht yesterday weakened to 29.91 per US dollar as of 5.45pm after global investors reduced holdings of Thai equities.

Classic Gold Future said gold prices would likely be on the rise this week on expectation of continued easing policy from the US monetary policy-makers' meeting last night and the European Central Bank's purchase of government bonds.

Profit-taking continues to be a negative factor for gold after its sharp price increase. This week's estimate ranges from $1,650 to $1,750 an ounce, said Classic Gold.

YLG Bullion International said global and domestic gold would likely continue to hit new highs. Its year-end estimate has been revised up to $1,830-$1,850 an ounce, equivalent to about Bt25,120-Bt25,400 per baht weight, from the previous $1,650.

Finansia Syrus Securities said the SET Index had plummeted 14.5 per cent during a two-month period after the dot.com crisis in 2001, and by 7.9 per cent over a two-and-a-half-month period in 2009 following the 2008-2009 sub-prime crisis. Currently, the index has dropped 8-14 per cent from its highest level.

However, the Thai bourse is expected to go no lower than 1,000 points due to the country's wider diversification of export markets and strong domestic consumption, the company said. The Kingdom's trade with Asian countries accounts for 60 per cent of its overall international trade.

Foreign investors are becoming more risk-averse due to the crisis developing in the financial markets, according to Capital Nomura Securities.

It said the SET Index could see its price-to-earnings (P/E) ratio fall to 10 times in the event that foreigners sell off their holdings and slow down a new round of investment. The downside risk for the index is 905 points.

Based on the worst-case scenario, a possible new round of crisis could dampen the P/E ratio down to 7-8 times with the downside risk for the SET Index in a range of 724-634 points, excluding downward revision of listed companies' corporate earnings, said the securities house.

The SET Index rose 8.84 per cent, the highest gain in the region, from the previous month to close at 1,133.53 points at the end of July on optimism over the domestic political situation. It increased 9.76 per cent from the end of last year to July 31, the second-highest rise in the region after Indonesia.

The Thai exchange's market capitalisation expanded 11.24 per cent from the end of last year to Bt9.27 trillion at end-July.

Foreigners were net buyers of stocks worth Bt37.87 billion in July after being net sellers in May and June. Their July transactions accounted for 22.71 per cent of total trading.

In the first seven months of the year, foreign investors were net buyers to the tune of Bt23.07 billion.

-- The Nation 2011-08-10

[Thailand]

With a 400 point jump in the Dow overnight it looks like big profits have been made by the sell/buy merchants with as always the little guy bearing the brunt!

[Chivas]

With a 400 point jump in the Dow overnight it looks like big profits have been made by the sell/buy merchants with as always the little guy bearing the brunt!

And a subsequent 400 point fall last night combined with Dax at 440 down and FTSE over 300 down....

[jalansanitwong]

Nothing has changed since Wall st crashed in 2008. All these scumbags in suits on wall st buying and selling with impunity. Wall st is nothing more than an unregulated casino run by gangsters. When it crashes again all the parasites will go running off to DC for another taxpayer funded bail;out.

USA never learns. Insane place.

[Chivas]

Nothing has changed since Wall st crashed in 2008. All these scumbags in suits on wall st buying and selling with impunity. Wall st is nothing more than an unregulated casino run by gangsters. When it crashes again all the parasites will go running off to DC for another taxpayer funded bail;out.

USA never learns. Insane place.

The reintroduction of the banning of Short selling would assist.

[midas]

Nothing has changed since Wall st crashed in 2008. All these scumbags in suits on wall st buying and selling with impunity. Wall st is nothing more than an unregulated casino run by gangsters. When it crashes again all the parasites will go running off to DC for another taxpayer funded bail;out.

USA never learns. Insane place.

The reintroduction of the banning of Short selling would assist.

but if it is introduced globally simultaneously could be a recipe for another 2008 incident

http://www.nytimes.com/2011/08/12/business/global/europe-considers-ban-on-short-selling.html?_r=1