Short selling picks up as investors flee
Written by Admin on Thursday, September 4th, 2008
POLITICAL SHOWDOWN
Short-selling picks up as investors flee
NUNTAWUN POLKUAMDEE
Share prices fell below 650 points yesterday as investors continued to flee the market due to political risk.
The Stock Exchange of Thailand index closed at 649.93 points, down 9.58 points, in trade worth 10 billion baht.
Foreign investors, net sellers of more than 100 billion baht worth of Thai securities this year, were net sellers of 3.22 billion yesterday.
Investor pessimism about the market and the overall political situation has led to a sharp increase in short-selling activities, according to local brokers.
Come back later
Pedestrians sit outside of a closed gold shop near Phra Athit Road. Numerous stores located in Koh Rattanakosin have closed temporarily due to fears of losses following the declaration of a state of emergency by the government on Tuesday. — CHANAT KATANYU
”The securities borrowing and lending business is very active now, as investors expect that the SET index will remain on a down trend,” said Narumol Artamnuayvipas, a senior vice-president of KGI Securities.
”Short-selling is active as well as long positions in the futures market.”
The SET50 index of top blue-chips fell 8.3 points yesterday to 457.02, while the ThaiDex exchange-traded fund closed at 468 points.
Considering a dividend of 4% to 6%, the TDEX would typically trade over the SET50 index by 10 points, so room for arbitrage exists between the two, Ms Narumol said.
Short-selling through securities borrowing and lending activities has also picked up, with KGI reporting activity worth one to 1.2 billion baht across 20 to 30 blue-chip stocks.
”SBL activity has increased significantly since the government announced its state of emergency,” Ms Narumol said.
Thanomsak Saharatchai, an executive vice-president at Capital Nomura Securities, said the SET index was falling directly due to political instability.
The falling baht, which is now at a 13-month low of 34.6 to the dollar, also led to greater pressure in the equities market, as investors short-sold against their portfolio in expectations of further declines.
”If politics worsen, we can expect to see the SET index fall to 610 points. But if the problems end in a compromise, the market could rebound quickly,” Mr Thanomsak said.
Apisit Limthamrongkul, a deputy research manager at Kiatnakin Securities, agreed market sentiment had remained weak since Tuesday’s decree, and predicted the index would move within a range of 640 to 660 points this week.
Travel warnings issued by foreign governments and the closures of airports in the southern provinces had also undermined sentiment, particularly as the tourist high season nears, he said.
