Offshore funds to keep exiting stock market, says Asia Plus

The SET index is under pressure by the ongoing dispute between China and the United States. (Bangkok Post photo)

Offshore funds are expected to continue to leave the Thai stock market in the final quarter of the year because of the ongoing US-China trade dispute and emerging-market currency chaos, says Asia Plus Securities.

The trade spat between the world’s largest two economies and the sharp fall in value of some emerging currencies against the greenback has led to capital outflows from the Thai stock market, the brokerage house said in a research paper.

From statistics over the past 10 years, foreign investors unloaded Thai shares during the October-December quarter more than others, it said.

In the fourth quarter over the past decade, fund outflows from the Stock Exchange of Thailand (SET) averaged 23 billion baht a year, and foreign investors pulled out from the Thai bourse in seven out of the 10 years, while selling more than they bought for a fifth straight year in 2017.

Like its regional peers, the SET index surged 44% during 2016 to 2018 and hit an all-time high at 1,851.51 points on Feb 27 this year, prompting foreign investors’ to take profits on Thai shares.

Year-to-date, foreign investors cashed 211 billion baht out of the Thai stock market, representing the second-largest sell-off market among five Asian countries after Taiwan. The other countries are South Korea, the Philippines and Indonesia.

Foreign investors’ net sales made up 29% of sell-offs in these five countries.

ASP Research wrote that even though foreign investors bought a net 2.4 billion baht worth in Sept 13 and 14, propelled by upbeat sentiment stemming from the recent royal endorsement of the last two of 10 organic bills paving the way for next year’s general election, such inflows are only expected to be short-lived as the historical SET index returns six months ahead of the previous six general elections indicate foreign investors were net buyers in just two of six historic data sets, averaging an amount of 2.6 billion baht.

The SET index on Monday eked out a marginal fall of 0.22% to close at 1,718.39 points with brisk turnover of 49.5 billion baht. Foreign investors remained net buyers, albeit at a smaller amount, at 3.045 billion baht.

ASP recently said in a note the Thai stock market’s upside potential is capped and profit-taking is expected on the horizon after last Thursday’s surge.

The brokerage house’s forecast is based on historical SET index returns six months ahead of the previous six general elections, averaging 0.84%.

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