Thai stocks posted a modest rebound yesterday, gaining 1.55% as most Asian equity markets closed higher after central banks across the world slashed interest rates and pumped tens of billions of dollars into the money markets to break the current crisis.
The Stock Exchange of Thailand index closed just off the 500-point barrier, ending trade at 499.99, up 7.65, in trade worth 20 billion baht. The index had fallen to a low of 473.94 points before rebounding in afternoon trade.
Energy stocks rose 4.31%, banks gained 2.06% and tech stocks dropped 1.55%.
But analysts cautioned that the gains, which followed four straight days of losses, were likely to be short-lived as the global economy looked more likely to fall into a recession going into 2009.
The Securities and Exchange Commission, meanwhile, directed local brokers to report their financial positions and margin lending activity on a daily basis.
Brokers must detail the status of their client cash, margin and futures accounts, including data on customer settlement defaults or accounts for which collateral has fallen under limits.
The SEC also wants brokers to disclose details about their proprietary trading portfolios, including holdings in stocks, bonds and derivative instruments.
SEC officials insist that the financial status of the local brokerage system remains sound, with capital funds comfortably in excess of minimum requirements.
But the rapid decline in the market - down 26% over the past month and over 42% since January - has raised potential risks as client asset portfolios have fallen sharply in value.
Prasit Srisuwan, the chief executive officer of BFIT Securities, said brokers were aware of the rising clearing and settlement risks in the current environment.
He said BFIT Securities had outstanding margin loans of just 250 million baht, out of credit lines of one billion and capital funds of 528 million.
BFIT Securities and other brokers impose strict rules on margin trading, with clients required to post additional collateral if their portfolio value falls with share prices. Heavy declines in values can lead to forced selling of shares to limit losses and potential credit risks.
Market regulators and participants plan to hold talks today to discuss the current global crisis.
SET president Patareeya Benjapolchai said the meetings would include representatives of the Association of Securities Companies, the Securities Analysts Association, the Association of Investment Management Companies and the Foreign Brokers Association.
She said that margin-forced sales and short-selling were not major problems for the SET. Outstanding margin loans for the system were just over 20 billion baht, a relatively small figure when compared with the overall size of the market. Forced selling activity accounted for just 0.6% of total trading volume.
Short-selling, or securities borrowing and lending, also represented a minor proportion of total trading.
Some exchanges, including the New York Stock Exchange, have over the past three weeks imposed short-selling bans on certain stocks, particularly financial institutions, to help curb share volatility as prices have fallen on panic sales by investors. Other markets, including Indonesia, France and Russia, have relied on circuit-breakers and temporary trading suspensions to help reduce volatility.
While analysts caution that short-term trends remain bearish, the recent slide in share prices means many solid stocks are trading at bargain prices.
Robert Penaloza, the chief executive officer for Aberdeen Asset Management, said he saw huge long-term opportunity for not just the Thai stock market, but global capital markets in general.
“Many stocks now are priced under their fundamental value,” he said, adding that for the near-term, market volatility was expected to remain high.
Reungvit Nandhabiwat, the secretary of the Thai Financial Planners Association, agreed.
For investors with a time horizon of less than one year, expect no real improvement in trends, he said.
“But you can start planning for medium- and long-term prospects. Over a four- to five-year period, you should see returns,” Mr Reungvit said.
Source: http://www.bangkokpost.com
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