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Bangkok emergency decree seen as risk for stock investment

Publication Date : 22-01-2014

 

While the political unrest is expected to have only a short-term impact in terms of dragging down trading turnover on the stock market, brokerage houses believe that any emergency decree announced this week could become a risk for investment.

Pattera Dilokrungthirapop, chairperson of the Association of Thai Securities Companies, yesterday said that putting aside the fact that staff faced commuting difficulties, stock trading turnover had markedly decreased since the "Bangkok shutdown" campaign by anti-government protesters began on January 13.

"Trading volume has dropped sharply to about 20 billion baht per day (US$608 million) in concerns over violence |surrounding the protests. Investors have slowed down their invest-|ment, but we believe the sharp drop in volume to be only a short-term situation. If the [political] situation eases, investment will return," she said.

Meanwhile, the Federation of Thai Capital Market Organisation's monthly meeting is scheduled for tomorrow, with a discussion on the impact of the local political situation on business and the economy high on the agenda.

Charoen Iamphattanatham, a first vice president at KT Zmico Securities, said the Stock Exchange of Thailand Index yesterday had moved sideways up, in line with its regional peers, on a rise in China's retail volume for December and relatively little violence surrounding the Thai political protests.

The political situation and the Monetary Policy Committee's next meeting need to be closely monitored, he said, expecting the SET Index support level to be 1,284 points and the resistance level to be 1,314 points.

KK Trade Securities sees a possibility of the caretaker government announcing an emergency decree this week, in which scenario it estimates the SET Index will move in a range of 1,270-1,260 points.

Based on the six previous times an emergency decree has been announced, the SET Index fell 0.9 and 1 per cent on average one day and one week, respectively, after the decree announcement - before rebounding by an average of 3.4 per cent one month later.

The brokerage house identifies the possible postponement of the February 2 election, which is ex-pected to be decided this week, and the caretaker prime minister's status as major risks that could drag the SET Index down to below 1,260 points.

Gold futures rebound

Kamolthan Pornpaisarnpichit, director of research at GT Wealth Management, said gold futures had become more active with an upward price direction, in line with global gold prices, for the Chinese New Year festival.

However, investors remain caution about their investment, he said, adding that they were focused more on smaller contracts.

Previously, gold prices had dropped sharply, with brokerage houses turning more to contracts for SET50 futures.

However, when the Thai bourse has seen sharp falls due to the local political situation, it has generally slowed down investors' speculative trading in the Thailand Futures Exchange, which directly affects futures traders, who earn commission from investors.

 

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