SET Index drops below 1,400 points

Fears over spread of Covid-19 to blame see investors selling off stocks

The Stock Exchange of Thailand Index slid below 1,400 points today (February 26) on overwhelming concerns over the further spread of the new coronavirus in Thailand where three more cases have been confirmed, bringing the country’s total to 40.

Investors dumped Thai stocks today, dragging the SET Index down by 5.05 per cent or 72.69 points to 1,366.41 points on active daily trading turnover of Bt93.2 billion. Airports of Thailand (AOT) saw the most active turnover of 5.29 billion,  falling 3.47 per cent to Bt62.50.

Therdsak Thaveeworatham, vice president for research at Asia Plus Securities, said that the plunge came on the back of worries about the Covid-19 outbreak in the country. Besides, with estimated global economic growth being cut this year, investors are concerned about a possible economic crisis and are selling off stocks.

From 1997 to now, three economic crises have occurred: the Asian financial crisis (Tom Yum Kung) in 1997; the Hamburger crisis in 2008; and Thailand’s political unrest in 2013. A crisis normally happens when a country records economic contraction for two consecutive quarters. The SET Index plummeted over 50 per cent and the Thai central bank cut the policy rate during all three crises.

However, Thailand is not yet in crisis as the economy has not contracted for two consecutive quarters, Therdsak pointed out. That said, investors have already been showing concern about the Thai economy, prompting the SET Index to tumble more than 20 per cent since the beginning of this year and this could continue as fears mount,

Statistically, when a crisis ends, the SET Index surges 40-50 per cent in six months. The sharp drops of Thai stocks are expected to be short term and to do with concern about the virus outbreak. The overall picture is therefore not all that bad and there are opportunities to buy cheap stocks with sound fundamentals, Therdsak said.

He urged investors to gradually accumulate stocks with good fundamentals, strong financial health and dividend yield of over 4 per cent in investment portfolios when their prices plunge. Central Pattana (CPN), CP All (CPALL), Digital Telecommunications (DIF), MCS Steel (MCS), Airports of Thailand (AOT), Wha Corporation (WHA), Pylon (PYLON) and Central Retail Corporation (CRC) were among his picks.

In the central Chinese province of Hubei, where the virus is believed to have originated, the number of cases appears to be stabilizing and should be under control within about one month, according to Chinese government figures. But the number of people infected elsewhere in the world is rising quickly, with clusters in South Korea, Italy, Iran and Japan.

If these countries control the virus epidemic within one month like China, stock markets could make V-shaped rebounds as  concerns ease over the new virus outbreak, Therdsak said.

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