Haris & Associates Phuket Thailand Legal Blog

THAI STOCKS have rebounded on the back of the country’s strong economic fundamentals after a steep drop of 64 points to an 18-month low on Monday, Finance Minister Apisak Tantivorawong said yesterday.

The Thai bourse joined several other Asian and European markets in the recovery, but China’s Shanghai Composite and Japan’s Nikkei 225 continued their second day of huge losses, dropping a further 7.63 per cent and 3.96 per cent, respectively.

Across Asia, financial authorities reacted swiftly to China’s rout after share prices fell more than 15 per cent in two days, fearing the prospects of serious spill-over effects.

In Bangkok, Apisak said the Thai economy remained solid, which supported a slight rebound in the Stock Exchange of Thailand (SET) Index that closed at 1,323 yesterday, up 1.75 per cent, after losing 4.73 per cent on Monday.

After witnessing the SET Index slide 64.55 points to its lowest level in the last 18 months following a worldwide market drop on Monday, the market started to pick up, as investors are convinced Thailand’s economic foundations are still strong, Apisak said.

Government Spokesman Sansern Kaewkamnerd said the Cabinet was briefed of the Thai and Chinese stock market situation, but no specific measures were discussed or would be taken at this stage.

In Kuala Lumpur, the Star reported that a special economic committee will be set up to ensure the nation’s economic prosperity, quoting Prime Minister Najib Razak, adding: “The objective of this committee is to ensure that growth and momentum will continue and generate prosperity in these challenging times.”

In Indonesia, the Jakarta Post quoted NH Korindo Securities Indonesia head of research Reza Priyambada as saying: “The JCI [Jakarta Composite Index] has rebounded or strengthened again after it was pushed quite low. Several policies that capital market regulators have issued, one of which allows publicly listed companies to carry out ‘buy backs’, have been considered quite positive by the market.” The analyst hoped that Indonesia’s economic fundamentals and strong-performing publicly listed companies could influence the market and hopefully neutralise negative sentiments, which were mostly coming from outside the country.

According to Bloomberg, the Indonesian stock exchange also narrowed the daily limit on share-price losses to 10 per cent in a bid to stem volatility after the benchmark index fell to a 20-month low.

The Korea Herald, meanwhile, reported that the country’s top financial regulator had pledged to take pre-emptive measures to cushion the fallout from a global stock rout and ease investor jitters.

Nagging concerns over China’s economic slowdown have sent local stocks and the South Korean currency won plunging, as foreigners dumped share holdings.

The benchmark KOSPI tumbled to a two-year low on a China stock rout on Monday.

“Recent external factors, including a sharp fall in the Chinese stock market, Chinese yuan devaluation and a possible US rate hike, dragged down the South Korean market,” Financial Services Commission Chairman Yim Jong-yong said.

Pimonwan Mahujchariyawong, deputy managing director of Thailand’s Kasikorn Research Center, said the yuan devaluation had caused a minor impact on Chinese demand for Thai products but a further drop in commodities prices and the bursting of the stock market bubble could exacerbate China’s domestic consumption.

“The bubble bursting in China’s stock markets could affect investors’ wealth and the country’s domestic consumption and that is something that we have to wait and see since the impact could be bigger. If China’s domestic consumption is affected then it could contribute to a further slowdown in Thailand’s economic recovery, as trade with China and arrival of Chinese visitors could be lowered as a consequence,” she said.

“A further drop in oil prices is another point of concern, as we thought it had bottomed out,” she said, adding Chinese tourist arrivals in Thailand would likely drop in the remaining months of this year due to seasonal factors and the Ratchaprasong bomb blast. “The China effect could worsen things in Malaysia and Indonesia and if the region is affected then Thailand could also be affected.”

“The US Federal Reserve could decide to delay its interest rate hike due to what is going on in China and that along with collective and economic stimulus measures from the Chinese government to maintain the country’s strong economic fundamentals are good news that could help stabilise the world’s money markets,” she said.

The Nation August 26, 2015 1:00 am