Thai Stocks Post Worst Week Since 2008 on Margin Rule Change

Thailand’s benchmark stock index fell the most since October 2011, completing its biggest weekly slump since the peak of the 2008 global financial crisis, on concern the bourse may increase margin requirements on trading.

The SET Index slid 3.3 percent, the most since Oct. 3, 2011, to 1,478.97 at the close in Bangkok. The gauge tumbled 7.5 percent this week, the biggest weekly drop since November 2008. The measure’s 30-day volatility climbed to 16.6 today, the highest since July 3, data compiled by Bloomberg show. Italian-Thai Development Pcl sank 7.1 percent. Advanced Info Service Pcl fell 4.3 percent, the biggest loss since Aug. 27.

The exchange may increase the level of collateral that customers must maintain in their trading accounts to 20 percent of their credit line, from 15 percent, the bourse said in a statement late yesterday. The rule change may reduce risks to the clearing system and help reduce volatility, the bourse said.

“Some brokers are asking their clients to sell” ahead of the proposed change, Padon Vannarat, an investment strategist at Maybank Kim Eng Securities Pcl, Thailand’s biggest stock brokerage, said in a phone interview today. “They are worried about this and sold today. When someone starts selling, everyone follows. The market reacted too much to the news.”

The measure, to be discussed with brokers on March 26, is just a proposal at this stage and isn’t a major factor in the index’s decline, central bank Governor Prasarn Trairatvorakul said today. Prasarn says the Thai equity markets gained more than regional peers recently, and are now consolidating.

Capital Controls

Increased Thai infrastructure investment and consumer spending have lured foreign fund inflows that have driven the SET Index up 24 percent in the past year and boosted the baht by 5.2 percent versus the dollar, making it the second-best performer among emerging markets. Special measures to stem the baht’s rapid appreciation aren’t needed at the moment, Thai Finance Minister Kittiratt Na-Ranong told reporters in Bangkok this week.

“There is a concern among investors that maybe the governor of the Bank of Thailand may do something to interrupt or intervene the strengthening of the Thai baht,” Prapas Tonpibulsak, who helps manage about $5.5 billion as chief investment officer at Krungsri Asset Management Co., said by phone from Bangkok. In spite of official denials, “there are still concerns.”

Slumping Valuations

The SET gauge rose to the highest level since 1994 last week to trade at 14 times estimated 12-month earnings, the most since Bloomberg began tracking data in 2006. Valuations have since fallen to 13.2 times, the lowest level since Jan. 23, the data show.

International investors bought a net $2.5 billion of Thai equities last year, the most since 2010, according to data compiled by Bloomberg. Overseas investors have sold about $220 million of Thai equities in the past four days, reducing this year’s net purchases to $82.9 million, down 97 percent for the same period in 2012.

“A lot of people are afraid that there could be certain measures to curb the baht from further strengthening,” Kongkiat Opaswongkarn, chief executive officer at Asia Plus Securities Pcl, Thailand’s second-biggest stock brokerage by value, said today by phone. The proposal to change cash-account levels “made the situation worse because the market had come down already and this further pushed the market down.”

The baht reached this week its strongest level since the currency’s devaluation in July 1997 sparked the Asian financial crisis. The baht lost 0.3 percent to 29.30 per dollar today.

Fitch Ratings raised its assessment on Thailand this month, citing a resilient economy and improving political stability. Prime Minister Yingluck Shinawatra helped defuse tension in 2011 by shelving measures that could allow the return to Thailand of her brother, former prime minister Thaksin Shinawatra, who was ousted in a military coup in 2006.

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