Shares of Italian-Thai Development (ITD) and property development companies led the decline of the Stock Exchange of Thailand (SET) index on Monday following Friday's major earthquake, with an analyst suggesting short-term psychological impact would last for a couple of days.
ITD shares sank by more than 23% to 0.2 baht after a 30-storey building of the State Audit Office that was under construction collapsed when the huge earthquake, measuring 8.2 on the Richter scale, struck Myanmar, causing tremors in Thailand, with one of the most significant tremors being in Bangkok's key economic zone.
The main contractor for the project is ITD-CREC, a joint venture between Thai contractor ITD and China Railway No.1 (Thailand).
The property sector contracted 2.69% and construction services fell 2.65%, as the overall index fell by less than 1.5%. In contrast, the construction material sector soared 2.12%, on an anticipated increase in demand to repair property damage both in Thailand and Myanmar.
In a filing to the SET, ITD said the ITD-CREC joint venture has insurance coverage for the State Audit office's full contract worth 2.13 billion baht, which includes protection against natural disaster-related incidents and third-party liability for up to 100 million baht.
The company is confident that the incident will not impact the construction of its other projects, the filing added.
Thanadet Rangsithananont, director of research at Pi Securities, said Friday's quake is likely to cause limited impact to the overall economy and potentially cause a short-term psychological effect on stock market trading for a couple of days.
The property sector might feel a particular impact as some consumers looking to buy a home would tend to avoid buying a condominium as high-rise buildings are now considered to be facing a greater risk.
The banking sector could also feel the pinch as prospective homebuyers might delay their purchasing decision, making banks extend fewer loans than they had expected.
However, the property sector accounts for only 5% of the SET's market capitalisation and contributes 8% to the overall economy. Consequently, the impact from the quake is unlikely to be severe, he added.
Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand), said the quake is expected to have a one-time, manageable negative impact on the SET index.
"We believe the market behaviour will be like what was seen after the tsunami in southern Thailand in 2004, with investors believing it will not repeat anytime soon but triggering all related parties to beef up warning protocols and related practices," he said.
KGI anticipates short-term negative sentiment towards high rise developers. However, news over the weekend showed that the management of each company were very active in checking and restoring client confidence.
The earthquake could lead to slowing momentum in tourism in the short-term, especially as Thailand is exiting the high season. This could give some negative sentiment to consumer, commercial property, hotel and transportation sectors.
According to Krungsri Securities, the tsunami on Dec 26, 2004 caused the SET index to drop 1.2% on the first trading day after the event and it recovered to the previous level within two trading days.
The brokerage estimates that the SET will drop only in the short term, referring to yesterday and today, by around 1.8% to 3%, with a support range of 1,155-1,130 points.
"The bourse is likely to gradually recover within three days if no new negative factors emerge," KSS said in a research note.
