Bourses drop as investors fret over Omicron variant impact

The Thai stock market, along with the global stock markets, continued to drop on Monday as investors assess risks and uncertainties surrounding the newly emerged Omicron Covid variant.

The SET Index plunged 20.92 points or 1.3% to close at 1,589.69 yesterday with trading value of 115.8 billion baht. Meanwhile, European stock markets rebounded slightly on Friday’s heavy decline.

However, alternative assets like cryptocurrencies such as Bitcoin and Ethereum and safe-haven assets such as gold all rose as investors seek refuge from volatility, according to Nuttachart Mekmasin, executive director at Trinity Securities.

Gold spot price slightly increased to nearly US$1,800 an ounce yesterday.

Analysts expect the Thai bourse to be volatile and market sentiment will remain subdued in the short term until scientists clarify data pertaining to the new strain’s resistance to vaccines and transmissibility.

Wijit Arayapisit, a senior analyst at Maybank Kim Eng Securities, said the market will continue on a downtrend in the short term as institutional investors who are holding a large portion of Thai stocks will likely decide to offload their shares to reduce risk arising from the uncertainties.

Natapon Khamthakrue, vice-president of Yuanta Securities, said besides the new strain, another factor to follow is the Federal Reserve’s direction for its monetary policies which is expected after its meeting on Dec 14-15.

Mr Nuttachart said the Thai stock market will continue to decline as investors wait for clarity regarding the new strain and how it will affect domestic economic recovery.

He said the first support line for the SET Index is at 1,580 points and if more negative news emerges the support line will be at 1,550 points.

However, in the worst-case scenario, the support level may plunge to 1,500 points if a new wave of the contagion emerges and causes the government to reimplement the full lockdown measures, he said.

In the short term, Mr Nuttachart recommended investing in export stocks as it will benefit from the depreciation of the baht which remained at around 34 baht per dollar.

The Yuanta Securities analyst said if lockdown measures are not implemented, the SET Index will stay at 1,590-1,600 points.

However, if many countries worldwide decide to reenter into full lockdown mode, the SET Index will drop by 5-7% to 1,550-1,570 points. Stocks that will benefit from the pandemic such as healthcare and medical equipment have a chance of recovery in the short term.

Global central banks may also postpone the timing of their interest rate hikes next year.

Mr Nuttachart recommended investing in stocks that are expected to regain outstanding growth next year including commercial banks, communications, industrial estates, transportation and power plants.

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