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The SET closed at 1,447.84 on Wednesday, up 0.4 points, as the USD/THB exchange rate hit another fresh multi-year and intraday high of 34.784 baht per dollar, 0.8% higher than the previous day’s close. As the baht was sinking, foreign investors sold about 11.09 billion baht worth of stocks, or 27.76% of yesterday’s total selling volume on the SET.
One may want to pay attention that during the months of January to June of this year, the average net sells for foreign investors of the SET was about 2.611 billion baht a month, according to the SET market data. Foreign investor selling has been accelerating as the net sells have already registered 20.153 billion baht since the beginning of July, almost eight times the monthly average net sells in the past six months. Foreign investors make up about 23% of the trading volume on the SET exchange.
From our technical viewpoint, the falling wedge chart pattern has been breaking down and the projected price is 1,370, with supports at 1,427, 1,412, 1,394 and 1,375.99. After several consecutive down sessions, a trend reversal (T/R) candlestick pattern has emerged. This could just be an oversold bounce as the RSI is approaching 30. A bullish trend reversal might not happen until the Thai baht stops falling further, and foreign investor net buys are established.
The fact that the equity market is forward-looking and has traditionally been viewed as an indicator of the economy, a large pullback in the SET could be reflective of a future recession, or vice-versa. Historically, most recessions are accompanied by stock market declines of 30% or more, meaning levels below 1,133.84. As the SET continues to slide downward while the Thai baht continues to weaken, the market may be signaling a further downturn of the economy is ahead for Thailand. |
