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Foreign factors to shape Thai market

BANGKOK: Foreign factors including the victory by the leader of a pro-independence party in Taiwan's election are expected to dominate Thai stocks this week.

Analysts said the direct impact of Taiwan's dumping of the long-ruling Nationalist government on Saturday would probably be limited but China's reaction could upset regional markets including Thailand.

"I think it would probably have a very limited impact," said Sriyan Pietersz, head of research at SG Asia Securities.

"But if it spooks the rest of Asia, it would Thailand as well, as a sizeable amount of the retail investment in Thailand comes from Taiwanese investors."

An analyst at another foreign securities house said he did not expect any major pullout of investments from Thailand.

"There will be uncertainty for a few days as investors wait and see the reaction of China," he said. "The Thai market is likely to react in line with regional markets like Hong Kong."

On Saturday, Taiwan elected Chen Shui-bian, leader of a pro-independence party reviled by Beijing, as president.

Chen subsequently held out an olive branch, saying he hoped to make a "journey of reconciliation" to China and would welcome visits to Taiwan by Chinese leaders.

Despite the barrage of invective it launched against Chen before the poll, Beijing's response to the outcome has been muted, saying it was "listening to the words, watching the action".

Baht traders said last week that a victory by Chen could be negative for the Thai currency by encouraging more players to opt for the dollar as a safe haven. But Pietersz doubted there would be much impact on the baht.

Tawatchai Asawapornchai, an analyst at UOB Securities in Bangkok, said the Thai market would also be influenced by the Dow Jones index and the outcome of the U.S. Federal Reserve's policy-setting Federal Open Market Committee meeting on Tuesday.

A poll of 30 dealers by Reuters in New York showed they expect a quarter percentage point increase in the Fed funds rate to six percent.

"If the FOMC meeting raises rates a quarter percentage point, then the initial reaction in the Thai market is likely to be very limited but it will entirely depend upon the performance of the global and regional markets," said Tawatchai.

Analysts also said last Wednesday's market-friendly court ruling in the Thai Petrochemical Industry Plc TPI.BK bankruptcy case was likely to start attracting back foreign investors who fled the market ahead of the announcement.

The Central Bankruptcy Court ruled that TPI, Thailand's biggest debt defaulter with $3.4 billion in debt to 147 creditors, was insolvent. It said it would be run by its current management until creditors agreed a plan to revamp the firm.

Analysts said long-term prospects for the Thai banking sector had improved as a result of the ruling, which should encourage more debtors to come to terms with creditor banks.

Dealers forecast the main SET Index would trade in a range of 398-438 points having finished up 3.91 points, or 0.99 percent, at 399.74 on Friday, down 0.66 percent on the week.

Average daily turnover last week fell 11.52 percent to 5.47 billion baht, against 6.19 billion for the week ending March 10. -Reuters