Bloomberg News

Thai Stocks Slump After Credit Suisse Cuts Rating on Politics

June 08, 2011

June 8 (Bloomberg) -- Thai stocks slumped for a seventh day, the benchmark index’s longest-losing streak in more than a year, as Credit Suisse Group AG downgraded the equities because of concern a July 3 election will fuel political instability.

The SET Index sank 2 percent to 1,014.58 at the 4:30 p.m. close in Bangkok, extending its seven-day drop to 5.8 percent. Credit Suisse lowered the stocks to “marketweight” and reduced the recommended allocation for banks, property and tourism shares, a day after Goldman Sachs Group Inc. lowered its rating.

The index has slid 8.6 percent from a 14 1/2-year high on April 21, approaching the 10 percent drop that signals a so- called correction to some analysts. Overseas investors have increased sales on concern the election will revive political violence that has destabilized Southeast Asia’s second-biggest economy since a coup in 2006. The vote will pit Prime Minister Abhisit Vejjajiva’s Democrat party against the Pheu Thai party, led by the sister of deposed premier Thaksin Shinawatra.

“Rating reductions by major international brokerages have added to selling pressure from overseas investors,” said Win Udomrachtavanich, chief investment officer of Asset Plus Fund Management Co. in Bangkok, which oversees about $900 million of assets. “Politics will be the biggest concern until the outcome of the general election is known.”

Pheu Thai would win 43 percent of the vote if elections were held now, compared with 37 percent for the Democrat party, according to a Dusit Poll that surveyed 4,694 people from May 23 to May 28. Pheu Thai is a successor to parties loyal to Thaksin that won the past four Thai elections.

Losing Streak

Bangkok Bank Pcl, the biggest lender, lost 2.3 percent, Land & Houses Pcl, the largest developer, slid 3.4 percent and Minor International Pcl, the biggest operator of hotel resorts, sank 4.2 percent. Banks, property and tourism-related stocks are the “most sensitive” to concerns over politics, Credit Suisse wrote.

The SET, Asia’s biggest decliner, had its longest-losing streak since the eight-day retreat ended Jan. 28, 2010. The baht slipped 0.2 percent to 30.34 against the dollar.

Investors should turn more “neutral” on Thailand’s stocks amid “higher election risk,” accelerating inflation and increased valuations, Dan Fineman and Siriporn Sothikul, Credit Suisse’s analysts, wrote in a report today. Goldman yesterday cited “uncertainty” caused by the election and Thailand’s sensitivity to oil prices and a lack of “top-down direction” for its decision to downgrade the nation’s equities.

Thaksin was ousted in a 2006 coup and has lived abroad since fleeing a jail sentence for abuse of power three years ago. He said Pheu Thai would win the election, the Straits Times reported May 28, citing an interview with him in Dubai.

Economy, Politics

“Many in the market underestimate the economic and market importance of politics in Thailand,” according to Fineman and Siriporn. “We believe the market prefers the Democrats.”

Overseas investors today sold 6.31 billion baht ($207.8 million) more of Thai stocks than they bought, a fifth straight day of withdrawals and boosting the total outflow in June to 13.9 billion baht, according to data from the Stock Exchange of Thailand’s website. They sold a net 16.7 billion baht in May.

Some demonstration leaders charged with terrorism for their role in protests last year are running for the Pheu Thai party, which is being led by Yingluck Shinawatra, Thaksin’s sister, according to the party’s website. At least 87 people were killed in the political unrest between March and May 2010, according to the health ministry’s website.

--Editors: Reinie Booysen, Tony Jordan

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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