The Thai stock market this week could escape the impact of the Cypriot government's decision to approve a series of measures designed to help it clinch a bailout deal and avert a financial meltdown, stock analysts said.
Protests in Cyprus, some of them violent, are distant matters that will have little to no effect at all on the Stock Exchange of Thailand, local analysts agree. (AFP Photo)
However, they expressed mixed views on whether the market's expected rebound would last long.
"We first need to understand that the uncertainty over Cyprus hasn't had even a 1 per cent impact on the Thai stock market's recent sell-off," Kiatkong Decho, a strategist at CIMB Securities (Thailand), said.
The Cypriot parliament late Friday passed nine bills, including three key ones to restructure the country's ailing banks, restrict financial transactions in emergencies and set up a "solidarity fund".
With potential bankruptcy just days away, lawmakers are racing to complete a plan to raise the funds necessary for the country to qualify for an international bailout.
Finance officials were scheduled to meet with representatives of prospective creditors Saturday to work on several new laws, including a crucial bill that would impose some form of a tax on bank deposits.
- Suranand charges: Political rumours sank the SET
The percentages and where the tax would apply are unclear, but a lawmaker said Friday it could be less than one per cent on all deposits.
The European Central Bank has given Cyprus until Monday to raise E5.8 billion (220.7 billion baht) to qualify for a E10-billion bailout, or it says it will cut off funds to the banks, a move that would likely cause them to collapse and possibly push the country out of the single economic bloc.
Mr Kiatkong said the economic crisis in the eurozone has already bottomed out, so it is unlikely that other members of the 17-nation bloc would face the same problems, or harsh European Union measures, as Cyprus.
The recent slump in the domestic stock market is due to concerns over the possible introduction of government tightening measures after the baht rose to its highest level since being floated in July 1997. The nosedive was also caused by a sell-off in response to the Stock Exchange of Thailand's plan to raise the collateral requirement for cash accounts to 20 per cent from 15 per cent.
In the week through Friday, the SET index fell 7.46 per cent to close at 1,478.97, trimming about 1.1 trillion baht off its market capitalisation. The weekly slump was the largest since October 2008, though the index remains 6 per cent up since the start of the year.
Thai stocks may continue to struggle in the early part of this week before recovering later, Mr Kiatkong said.
A possible easing of concerns over the higher collateral requirement for cash accounts, and window-dressing as the quarter-end nears may help bolster market sentiment, he said.
"If the SET index can remain firm above the 1,500 level, it will climb towards 1,600 points by early May," he said.
Kavee Chukitkasem, head of research at Kasikorn Securities, said the Thai bourse was shielded from the Cyprus crisis and that its recent turbulence was due only to internal factors.
The SET index could stage a technical rebound next week, but the recovery is unlikely to be sustained, he said.
Mr Kavee said also that lingering anxiety over the possibility of the Monetary Policy Committee coming up with measures to curb the rising value of the baht at April 3's policy rate meeting was also casting a shadow over the stock market.
Despite anxiety within the eurozone over the Cyprus situation, Sompop Manarungsan, president of the Panyapiwat Institute of Management, said the problem must be kept in context.
Cyprus is a small island with a gross domestic product of E20 billion, which is only a fraction of the E13-14 trillion combined GDP of the 17-nation eurozone, he said.
Its financial crisis should, therefore, be much easier to resolve than those of, say, Italy or Spain.