Equities Poised For Further Losses In The Lead Up To Elections
BMI View: Thai equities have technically entered bear market territory and we see room for further losses over the coming weeks. We caution that the Thai baht could also face further selling pressure as foreign investors continue to shift capital abroad amid escalating political tensions. We see a remote chance for a long-term resolution to the deep political divide in Thailand and we warn that investors could begin to grow weary of the prolonged stalemate.
Thai equities are technically in a bear market with the benchmark Stock Exchange of Thailand Index (SETI) off by 20.9% from its May 2013 peak. Although equity valuations in Thailand have become more attractive relative to the region following the deep sell-off, we see room for further losses over the coming weeks as political unrest looks set to intensify in the lead up to February 2 elections. The technical picture for the SETI also supports our bearish short-term outlook, with the index closing in on its August low of 1,276 amid declining volumes (see chart).
Latest data published by the Stock Exchange of Thailand indicate that foreign investors have already pulled more than THB200bn (US$6.3bn) worth of funds from the local equity market - THB88.6bn (US$2.8bn) from stocks listed on the main bourse alone - since protests began in November. Meanwhile, the Thai baht is among the worst performing currencies in the region for 2013, having depreciated by around 5.0% against the US dollar since November to trade at THB32.84/US$. We believe that the Thai baht could face further selling pressure as foreign investors continue to shift capital abroad as the political stalemate in Thailand stretches into Q114.
|Technically A Bear Market|
|Thailand - Stock Exchange of Thailand Index (SETI) & Volume, mn shares|