Stock markets across Asia plunged on Wednesday, with the Stock Exchange of Thailand (SET) index falling by 1.6% as fears of mounting risks in emerging markets were exacerbated by the Indonesian rupiah slumping to a two-decade low.
On Tuesday, the rupiah fell to its weakest level since Indonesia was embroiled in the 1997 Asian financial crisis, with concerns flaring over the country's current account deficit and reliance on overseas financing, which heralds risk exposure to external debt.
Indonesia has been highlighted as financially vulnerable, especially as the US Federal Reserve continues to normalise its policy interest rate, subsequently resulting in lower global liquidity, and tensions rise in the Sino-US trade dispute.
Investors' panic selling was reflected in the Jakarta Composite Index's 3.8% dive, with Hong Kong's Hang Seng index and China's Shanghai SE Composite falling by 2.6% and 1.7%, respectively.
Fears of mounting financial risks among emerging markets were further stoked by financial tremors in Argentina and Turkey, curbing investors' appetite for riskier assets and nearly sending the US dollar to a two-week high.
On the domestic front, the SET index closed at 1,686.37 points, declining by 28.04 points or 1.6%, in turnover worth 60 billion baht.
Institutional investors were net sellers of 3.7 billion baht, with foreign investors selling a net 2.2 billion worth of shares. On the other hand, retail investors were net buyers at 5.4 billion baht and brokerage firms bought a net 598 million baht.
Despite the sell-off in emerging markets, Thailand's economic fundamentals are stronger than those of peers and the sell-off is expected to be short-lived for the domestic bourse, said Nuttachat Makmasin, vice-president of Trinity Securities.
Thailand's current account surplus at about 10% of the country's GDP and ample foreign reserves, which are triple the short-term foreign debt, provide buffers against external shocks, Mr Nuttachat said.
After investors absorb recent financial developments, foreign funds are expected to return to the SET index, he said, noting that such fund flows are poised to move into Thai bonds more than Thai equities because of the latter's high valuation.
Kasikorn Securities vice-president Prakit Siriwattanaket said fund outflows have been seen in emerging markets since early this year, while emerging-market currencies have depreciated by 5.5% year-to-date, though the circumstances are still a far cry from an economic crisis.
Thailand's bond and stock markets remain attractive on the back of strong economic fundamentals, but domestic politics continues to curtail investor confidence, Mr Prakit said.
If the election law is approved this month and the general elections take place as scheduled, the expectation is that the SET index will reach 1,898 points in 2019, he said.
Risks factors preying on the Thai stock market include delays in the general election, a slowdown in emerging-market economies and the possibility of a full-blown trade war, Mr Prakit said.
