SET slides on rising globalfears of possible US recession

Business News - Tuesday December 18, 2007

STOCK MARKET / PERFORMANCE

SET slides on rising globalfears of possible US recession

KRISSANA PARNSOONTHORN

Thai shares plunged 2.25% yesterday as investors were worried about the state of the US economy on the back of rising inflation.

The Stock Exchange of Thailand index closed at 817.62 points, down 18.78 points, in trade worth 12.58 billion baht.

Foreign investors and local institutions were net sellers of securities worth 2.23 billion baht and 512.17 million baht respectively, while retail investors made net buys of 2.74 billion baht.

Kavee Chukitkasem, research head of Kasikorn Securities, said investors around the world were concerned that the US Federal Reserve would be unable to cut interest rates at its next meeting if inflation remained around 4%.

''If the Fed is reluctant to cut rates, the US economy might possibly plunge into a recession. I don't know what will be the next means to help shore up a huge economy like this,'' he said.

Concern about the US economy has pressured global stock markets. If the US falls into recession, many countries including Thailand would feel the impact, especially on exports.

The SET declined in line with other regional markets. Tokyo's Nikkei 225 fell 1.71%, Shanghai dropped 2.6% and Hong Kong lost 3.51%. Korea's Kospi index dropped 2.9%, Taiwan tumbled 3.54% and Singapore lost 3.2%.

Mr Kavee predicted that the Thai stock market would continue to slide over the next few days as worries about the US economy would persist.

Paiboon Nalintarangkurn, managing director of Tisco Securities, said investors should closely monitor the progress of PTT in transferring the gas pipelines to the state. The transfers would reduce PTT's assets by about 100 billion baht.

''This issue will have a psychological impact on other listed state enterprises. Investors are worried that some state enterprises could face a similar transfer of assets to the state,'' he said.

Trading of PTT shares remained suspended yesterday until the energy giant completed its plan to transfer gas pipelines back to the government, in line with a court ruling last Friday.

The mutual fund industry was still in chaos and four companies _ TMB Asset Management, UOB Asset Management, Ayudhya Fund and Thanachart Fund Management _ temporarily stopped buying and selling of their equity funds on the suspension of PTT shares.

PTT accounts for about 20% of the SET's capitalisation and between 10% and 15% of trading turnover each day.

AYF chief executive Chatrapee Tantixalerm said the suspension of 14 equity and index funds was fair for both investors and the company as net asset values could not be calculated without PTT.

''It's an unusual situation and [we did it] to prevent possible damage to investors,' he said. ''If the PTT suspension is longer than Wednesday, I think we should set a standard practice, so that all fund managers will do the same.''

However, some funds were still accepting buy and sell orders but clearing and settlement will be delayed.

The SET held an LTF/RMF fair on the weekend where investors bought long-term investment and retirement mutual funds worth 120 million baht. NAVs of the funds they invested in will not be known until PTT shares resume trading.

Bangkok Post