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Thai bourse: Inflation, political woes scare foreign investors


June 25, 2008

Thai bourse: Inflation, political woes scare foreign investors

Foreign investors have dumped Thai stocks with net sales of some Bt40 billion during the past month due to concerns of rising inflation and the country's ongoing political turmoil, according to Stock Exchange of Thailand (SET) executives.

SET chairman Pakorn Malakul Na Ayudhya said the ongoing nature of the government-opposed People's Alliance for Democracy (PAD) demonstrations has worried foreign investors, although it is not the main negative factor of the SET plunge.

He said the censure debate against the government by the opposition party and senators should be viewed as a good move because it gave members of parliament an opportunity to voice their opinions and make suggestions while the government is able to take the floor to clarify the doubts of critics.

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Pakorn conceded that surging inflation is the key negative factor that has pressed foreign investors to dump their shares, not only in the Thai bourse, but in other Asian stock markets.

Inflation in India and China soared to 11 and 8 percent respectively, resulting in foreign investors unloading shares across the region.

Stock markets in China and Vietnam had so far dropped by 50 and 60 percent, while the SET index declined by 15 percent - close to the level which led the Bank of Thailand to impose the 30 percent reserve requirement in December 2006.

The Thai stock market fell by less percentages than those of neighbouring countries, because the index had not risen considerably - and prices of blue-chip stocks remain rather attractive.

Pakorn believed local and foreign investors would return to invest in the Thai market when the political situation stabilises.

He said the SET index had already fallen to a low level and so it is a good opportunity for long-term investors to gradually accumulate blue-chip stocks.

SET president Patareeya Benjapolchai said the selling of stocks by foreign investors in the market had been rather heavy because they were concerned over the political turmoil and the rapidly rising inflation. She admitted the rising inflation is a risk factor hard to manage because it depends on the oil price movement.

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