VZCZCXRO6431
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #3229 3021003
ZNR UUUUU ZZH
P 281003Z OCT 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 4843
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
INFO RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 5766
RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
UNCLAS BANGKOK 003229
STATE FOR EAP/MLS AND EB
STATE PASS TO USTR
TREASURY FOR OASIA
COMMERCE FOR EAP/MAC/OKSA
SINGAPORE FOR FINATT BAKER
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD TH
SUBJECT: THAI STOCKS PLUNGE. AGAIN.
Sensitive But Unclassified. For Official Use Only.
1. (U) The Stock Exchange of Thailand (SET) dropped approximately
10.5 percent October 27, prompting an automatic 30 minute halt in
trading for the second time in one month, and only the third time
since the circuit-breaker mechanism was implemented in 1975. The
main SET index closed at 387.43, down more than 54 percent since
January and at its lowest level since May 2003. Energy and banking
stocks led the sell-off, in which foreign investors reportedly sold
approximately $64 million in shares.
2. (U) The Thai press reported October 28 Deputy Prime Minister
Olarn Chaipravat's comments that yesterday's sell-off was due to
continued selling by foreign investors. Olarn stated that foreign
holdings of Thai shares now stand at approximately $2.5 billion.
3. (SBU) The Executive Director of a financial services company
told us that Olarn's comments directed at foreign investors are not
off the mark. Thai investors have been largely "sitting on the
sidelines" the past few years due to Thailand's political
uncertainty. In the meantime, much foreign investment in the SET
has come by way of hedge funds that are now unwinding investments,
turning stocks into cash for their clients. As such, he argued,
yesterday's sell-off had more to do with global financial stresses
than with Thailand's domestic market situation.
4. (SBU) The Vice President and Head of Research of another
financial firm concurred on the role of foreign investors, but also
noted other reasons for the sell-off, namely: a panic over a
spill-over into Asia of the U.S. financial crisis, declining
commodity prices, and the lay-offs that will occur from an
anticipated closing of factories due to decreased demand for
exports. She pointed to a forecast by the Federation of Thai
Industries that Thailand could see one million layoffs due to
weakening demand domestically and abroad. (Note: she also believes
foreign holdings of Thai shares run higher than Deputy Prime
Minister Olarn's estimate, at approximately $4.5 billion. End
Note.)
5. (SBU) Comment: With total SET capitalization estimated (after
yesterday's closing) at USD 91 billion, it is hard to argue that the
sell-off by foreign investors, if only USD 64 million, was the cause
of the plunge. It is not clear how good the data are with regard to
foreign participation in the market. What is clear is that for many
observers, foreign investors seem to a target of blame for the
market's collapse. End Comment.