Thailand's Stock Benchmark Drops 10% From January Peak, Marking Correction

Thai stocks dropped, driving the benchmark index into a so-called correction, on investor concern that accelerating inflation will boost borrowing costs and erode corporate earnings

The SET Index fell 7.75, or 0.8 percent, to 941.34 at the 12:30 p.m. lunch break in Bangkok, a decline of more than 10 percent from a Jan. 6 peak, the threshold some analysts and investors refer to as a correction. The gauge extended its drop this week to 4.4 percent, headed for its worst weekly performance since the period ended April 16.

Benchmark stock indexes in Indonesia, the Philippines, China and India have also tumbled more than 10 percent from their peaks as Asian central banks raise borrowing costs to stem price gains. Thailand’s interest rates need to rise further because inflation is the “key risk” to the economy, Bank of Thailand Governor Prasarn Trairatvorakul said on Jan. 26.

“Investors are selling more on the Asia inflation expectations and rising interest-rate outlook,” said Scott Lim, who oversees the equivalent of $670 million of assets at Kuala Lumpur-based MIDF Amanah Asset Management Bhd. Thai equities “had such a fantastic year, for them to return 10 percent from the peak is not much to ask for,” he said.

Inoue Rubber (Thailand) Pcl, the nation’s largest maker of motorcycle tires, slid 4.7 percent after saying quarterly profit dropped 52 percent because material costs surged. Kim Eng Securities Thailand) Pcl, the country’s biggest stock brokerage, gained 2.8 percent after announcing higher dividend.

Overseas investors sold $282 million more local shares than they bought this week, taking net sales this quarter to $940 million, according to stock exchange data.

China Rates Concern

The MSCI Asia Pacific Excluding Japan Index is heading for its worst weekly performance since the period ended May 21, after China raised interest rates for the third time since mid- October to curb inflation and as Egyptians intensified protests after President Mubarak defied calls for his immediate resignation. China was Thailand’s biggest export market in 2010.

Thailand’s consumer prices rose 3.03 percent in January from a year earlier, the most in five months, according to official data released Feb. 1.

Inoue Rubber slipped 4.7 percent to 12.1 baht, poised for the lowest close since April 21. Net income slumped to 50.4 million baht ($1.6 million) in the quarter ended Dec. 31, from 105.3 million baht in the same period last year, after the cost of natural and synthetic rubber surged, the company said today.

Kim Eng Securities gained 2.8 percent to 14.8 baht, set for the steepest advance since Jan. 26. The brokerage will boost its final dividend payment to 1.18 baht a share, an increase from a payout of 1 baht a share a year earlier.

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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