BANGKOK, July 12 – Southeast Asian stock markets continued to slide today as fears that the euro zone debt crisis could spread dampened appetite for global risk assets while lower oil prices prompted selling in resource and commodities shares.
Indonesia’s main share index dropped 1.4 per cent after hitting a record high on Friday. Jakarta is Asia’s top market this year as strong domestic consumption has bolstered its economic outlook amid global uncertainty.
Stocks in Singapore, Thailand and Vietnam dropped over 1 percent while Malaysia and Philippine shares posted smaller losses.
Market players expect regional central banks to tighten policy to combat inflation as economies expand.
However, Indonesia’s central bank held its benchmark policy rate at 6.75 per cent today.
In Bangkok, most investors expect the Bank of Thailand to raise its policy rate by 25 basis points to 3.25 per cent on Wednesday.
Widespread concerns about inflation and the budget deficit have been in the limelight since last week due to the pro-growth policies of the Puea Thai Party, which is to form the next government.
The Thai index has now lost all of the sharp gains recorded on July 4, the day after a general election that was welcomed by investors for removing political uncertainty.
Broker Citi Investment Research said some policies such as infrastructure investment and financial leverage boded well for sectors such as building materials, contractors, banks and property. However, the broker left its index target unchanged.
“While upbeat, we prefer to maintain our SET target ... until the cabinet members and policy priorities become clear,”said Suchart Techaposai, head of Thailand country research .
“To deliver all likely campaign promises without deregulation, tax reform, a stronger Thai baht and higher interest rates, inflation and public debt will probably soon be a threat, even though track and irrigation investment will clearly improve long-term productivity,” Suchart added.
Foreign investors sold Thai shares worth US$98 million today, the exchange said. They bought almost US$500 million in three sessions after the election results last week but fund flows were choppy thereafter.
Indonesia posted US$27 million in outflows today after three sessions of inflows and the Philippines saw US$7.6 million in outflows, adding to US$3.3 million in in the previous two sessions, according to Thomson Reuters data.
The MSCI index of Southeast Asia fell 1.7 per cent by 0912 GMT, while the MSCI index of Asia excluding Japan plunged 2.7 per cent.
As equity markets tumbled on concerns more countries will be engulfed by the euro zone’s debt problems, Indonesian coal miner Adaro Energy dropped 3.9 per cent to a one-week low and Singapore’s Keppel Corp , the world’s largest oil rig builder, fell 2 per cent.
Energy Development Corp , the Philippines’ largest producer of geothermal power, lost 0.7 per cent, Malaysian palm plantation firm IOI Corporation fell 0.6 per cent and Thai olefins maker PTT Chemical slid 1.9 per cent.
In Bangkok, caution about rising interest rates hurt property shares as it could lead to higher home loan rates, denting demand. The property subindex dropped 2 per cent.
Singapore-listed property developers with exposure to China were among the worst hit as investors pared their positions on worries that China’s high inflation could mean more tightening measures.
CapitaLand slumped 4 per cent and Keppel Land was off 1.9 per cent. – Reuters
