Despite undergoing a significant stock market correction, foreign fund outflows are expected to subside and reverse to net purchases this month as negative factors have been accounted for, says Asia Plus Securities (ASP).
Foreign net sales of local equities have begun to slow down, switching to net purchases in early July, said senior executive vice-president Poranee Thongyen.
After 15 days of net sales, foreign funds last Friday reversed to a net buy position of US$350 million (11.61 billion baht) in five regional markets, namely Indonesia, the Philippines, South Korea, Taiwan, and Thailand, said Mrs Poranee.
All five markets recorded foreign net purchases of local equities for the first time since Jan 23, said ASP.
South Korea logged foreign net purchases at $206 million and Taiwan at $23 million. For Asean countries, foreign net purchases in Indonesia registered $25 million, while the Philippines and Thailand recorded foreign net purchase worth $10 million and $85 million, respectively.
Foreign holding in Thai stocks is low, with many stocks having already undergone a significant correction and absorbed bad news, said Mrs Poranee.
Statistically, foreigners have been net buyers in July for seven out of ten years at an average of 4.39 billion baht, boosting the Stock Exchange of Thailand (SET) index by 1.13% on average, she said.
Regional markets have rebounded after an undergoing significant correction, but trading remains high volatile as a result of the global trade war and the US Federal Reserve's interest rate hike, said Mrs Poranee.
In June, all five regional markets possessed net sales of $6.18 billion, which was the second biggest net sales this year, following $8.4 billion in February 2018. Thai stocks sold $1.5 billion or 49.7 billion baht, she said.
Mrs Poranee said Thailand's interest rate hike is more certain in the final quarter, with banking stocks expected to benefit from the rate uptrend.
Second quarter earnings results of the banking sector, meanwhile, will be reported next week. Net profit is estimated at 46.6 billion baht, falling 11% from the first quarter but growing 2.8% year-on-year, she said.
Fee income is expected to drop 10.7% quarter-on-quarter and 0.6% year-on-year after large-cap banks have eliminated online banking fees, she added.
Komsorn Prakobpol, head of strategy unit at Tisco Economic Strategy Unit, said foreign investors have sold local equities worth 220 billion baht since October 2017, with the SET index declining by 11% from January's all-time high overshooting 1,800 points.
But such a decline is considered less severe compared with previous foreign sell-offs , particularly panic selling occurred when the US Federal Reserve announced it would halt its monetary stimulus programme in 2015, said Mr Komsorn.
Foreign outflows from the domestic stock market totalled 250 billion baht in 2015, causing the SET index to dip by 25%, according to Tisco Economic Strategy Unit.
Thailand's current account surplus, resulting from revenue generated through foreign tourists and lower global oil prices, and the country's GDP growth momentum act as buffers against the impact from foreign fund outflows, he said.
Apart from GDP growth prospects, Thailand's economic fundamentals remain sound compared with emerging market peers and private consumption has a positive outlook, said Mr Komsorn, adding that foreign investors are expected to sell local equities at a slower pace because of these supporting factors.
