Markets in red as crisis deepens
Written by changthai11 on Tuesday, October 7th, 2008
ECONOMY & INVESTING
Markets in red as crisis deepens
Europe struggles to cope with meltdown
NUNTAWUN POLKUAMDEE and DARANA CHUDASRI and WICHIT CHANTANUSORNSIRI
Share prices tumbled across the globe yesterday amid investor fears about the growing global market impact of the meltdown in the US financial sector.
The passage of a $700-billion bailout for US banks late last week by the US Congress did little to reverse concerns that more banks worldwide could collapse as a result of the global credit crunch and slide in US asset prices.
European leaders over the weekend met to discuss the growing global crisis, even as the German government agreed to pump in 50 billion for Hypo Real Estate and France’s BNP Paribas announced a takeover of the ailing Belgian financial services group Fortis.
The Stock Exchange of Thailand slid 6.48% yesterday to a five-year low, mirroring sharp losses elsewhere. Japan’s Nikkei dropped 4.25% to a four-year low, while Hong Kong, Shanghai and Singapore all lost more than 5%. Jakarta was the biggest loser, with the Indonesia Stock Exchange’s main index off over 10%.
Analysts said with the US and Europe slowing sharply, Asian economies and exporters would inevitably be hit.
Usara Wilaipich, senior economist at Standard Chartered Bank (Thailand), said export and tourism revenues would certainly decline as the US, Europe and Japan slipped into recession.
For Thailand, economic growth in 2009 was projected to drop to 3.9% from earlier forecasts of 4.5%, Mrs Usara said, even though oil prices next year are expected to average just $90 to $95 per barrel compared with $115 this year.
The SET index dropped from the opening, and closed at an intra-day low at 551.8 points, down 38.25, in trade worth 14.4 billion baht. Losers outpaced winners 379 to 25, with 32 shares unchanged.
Retail investors were net buyers of 3.3 billion baht worth of stock yesterday, while local institutions were net sellers of 1.08 billion and foreign investors net sellers of 2.22 billion.
Blue-chip stocks led the selloff, with PTT Plc falling 24 baht to 202, PTT Exploration and Production falling 14 to 110 and Kasikornbank off 4.50 to 59.
Bank of Ayudhya dropped 11.56% to 13 baht on reports that the US conglomerate GE could be forced to divest its stake in the local bank due to the US economic crisis. GE Money, GE’s consumer finance arm, owns 32.9% of BAY.
Finance Minister Suchart Thada-Thamrongvech said asset prices worldwide were declining as a result of the US financial crisis. “Thailand will also suffer, although to a smaller extent than the US and European markets.”
He said the ministry was developing a new assistance package aimed at easing funding constraints for small and medium-sized companies.
Cabinet ministers next Tuesday will also consider a proposal to raise tax deductions for contributions to long-term retirement and retirement mutual funds beyond the 500,000 baht ceiling or 15% of income approved earlier this year. An increase in deductions would apply only for contributions made for the current tax year.
SET president Patareeya Benjapolchai said that local political tensions also hurt sentiment after Chamlong Srimuang, a leader of the anti-government People’s Alliance for Democracy, was arrested on Sunday.
“It’s a hard time to evaluate the market situation. Investors just have to see what the impact [of the US crisis] will have on the European market,” she said.
Mrs Patareeya said the SET was moving forward with its matching fund programme, a project to establish five new mutual funds partly funded by the exchange to invest in local stocks.
It also would invite Middle Eastern funds to invest in a new Shariah index, representing listed firms that operated in line with Islamic law.
But even with the SET now at a five-year low and at a cheap price of just nine times earnings, analysts said downside risks remain large.
“No one can tell where the market bottom will be. For sure, the market is on a downtrend,” said Kavee Chukitkasem, an assistant managing director at Kasikorn Securities.
“The European market is tumbling like dominoes, so the impact on the rest of the world market will be huge.”
In the currency markets, the baht fell to 34.38/44 from 34.21/26 on Friday on capital outflows as investors dumped emerging market assets.
