Thai Stock Market Expected to Rebound Today : Securities: The prime minister’s resignation cheers investors. But the long-term outlook hinges on who replaces him.
With the resignation of Thailand’s controversial prime minister Sunday, the stock market is expected to recover today from a slide begun with last week’s political violence, according to brokers here.
“I think the market should go up tomorrow,” Kongkiat Opaswongkarn, managing director of Baring Research Ltd., said Sunday night. Earlier in the day, embattled Prime Minister Suchinda Kraprayoon announced on national television that he was resigning in the wake of Thailand’s most violent political protests in 19 years.
“The worst is over,” Kongkiat said. But the market will be cautious after today’s anticipated rally, he said. Its stability depends on whether a new prime minister comes from the ranks of the military or from the government opposition, Kongkiat said. It also depends on how insistent protesters are in finding and punishing the military leaders responsible for last week’s deaths.
Suchinda had said that 40 people died and more than 600 were injured when violence broke out last Monday, but anti-government protesters said there were several hundred deaths and that hundreds of protesters remain missing.
The day after the violence flared--last Tuesday--the Stock Exchange of Thailand (SET) index dropped 8.8%. It did not recover from its downward spiral until two days later, shortly after King Bhumibol Adulyadej, a revered figure, asked Suchinda and Chamlong to end the violence and hammer out a compromise.
On Friday, the SET index closed at 718.51 points, down 20 points, or 2.7%, from Thursday. Trading was active at 5.5 billion baht ($222 million). The index was down 1.96% from the previous week’s close of 732.89 points.
Although the king’s intervention calmed the nation, there is fear that the pro-democracy protests--which at their height attracted tens of thousands of people in Bangkok and spread to provincial capitals--will flare up again. Analysts and brokers said that unlike last year’s bloodless coup, which one observer described as doing no more harm than a hiccup to the Thai economy, the bloody protest last week led to early shop closings, hijacked buses and curfews, all of which left some investors shaken and gun-shy.
One foreign investor said potential investment partners who had scheduled a business meeting in Bangkok asked that it be held in Hong Kong instead.
Bankers have had second thoughts too. For example, a $100-million, five-year credit line for Thai Farmers Bank, the nation’s second largest, had been scheduled to be issued in Hong Kong but due to the political unrest, the deal has been delayed, said Roger Butterworth, an analyst with W. I. Carr (Far East) Ltd.
“The market is volatile,” he said. “Thailand is perhaps going to find it more difficult to attract foreign investment in the future.” He added that Thailand’s loss will be its neighbors’ gain, particularly competitors such as Indonesia, Malaysia and China.
“The direction of the market (this week) totally relies on what kind of political information will be released to the public,” said Somjate Moosirilert, an executive vice president of National Finance & Securities Co.
The Suchinda government had censored coverage of the political protests, including local broadcasts of CNN and other television reports. The gag on the press helped fuel a political rumor mill that in turn influenced the stock market.
“Ninety-nine point nine percent” of the rumors last week were false, said Timothy McKenna, a research manager at Jardine Fleming Thanakom Securities Ltd. If parliamentary sessions beginning today are broadcast live, “investors will be tuned in and decisions to buy or sell will change on a minute-by-minute basis,” he said.
Local investors, as usual, were “more or less short-term speculators,” said National Finance’s Somjate. “They rely on emotions. If they hear there is a protest at Ramkhamhaeng (University), they would sell.” Investors from Hong Kong and Singapore also tended to be short-term bargain hunters, but Westerners were not major players in the market the past two weeks, he said. Although Western investors did not liquidate their Thai portfolios, he said, many reduced their exposure.
“Buying opportunities are available,” said Butterworth of W. I. Carr. “The stocks investors should look for are obviously the blue chip stocks. Foreign investors are taking a long-term view; they’re looking at the fundamentals.”
Investors who know the Thai market will continue investing in the country, said David Hendrix, country manager for Citibank in Thailand and a member of the board of governors of Bangkok’s American Chamber of Commerce.
“There’s nothing in the past two weeks that has changed the fundamentals,” Hendrix said.
Others share his optimism and believe that it won’t be long before the political unrest is over. “Thai people have always shown an ability to find a compromise even in the most intractable situation,” Butterworth said.
