The benchmark SET Index (SET) tumbled 5.2% on Thursday amid concern that prolonged political unrest will curb economic growth. That left the measure valued at 10.8 times earnings estimates for the next 12 months, the cheapest since June 2012, data compiled by Bloomberg show. The gauge's 14-day relative strength index sank to 19.91, below the 30 threshold that some traders use as a signal to buy. The last time it fell this low, in Oct 2008, the SET rallied 20% in two weeks.
"I was very busy buying stocks yesterday," Adithep Vanabriksha, the chief investment officer for Thailand at Aberdeen Asset Management Plc, which oversees about $324.6 billion worldwide, said by phone on Friday. "I still strongly believe that the current political crisis will be resolved in a peaceful way and the stock market will rebound."
While exchange data showed local institutions unloaded stocks on Thursday after political groups opposed to caretaker Prime Minister Yingluck Shinawatra threatened to surround government ministries and occupy major intersections in Bangkok on Jan13, foreign investors were net buyers. Charamporn Jotikasthira, president of the Stock Exchange of Thailand, said in a phone interview on Friday that the slump in equities is temporary and valuations are attractive.
The SET's drop on Thursday followed a 6.7% retreat in 2013. The gauge slipped 0.3% to 1,226.61 at 11.39am in Bangkok after closing at the lowest level since August 2012 on Thursday. The MSCI Asia Pacific Excluding Japan Index sank 1%.
The baht weakened for a record 12th day on Friday, falling 0.1% to 33.004 per dollar. The yield on 3.625% government debt due June 2023 was steady at 3.88% Friday, and has declined five basis points since Dec 27, data compiled by Bloomberg show.
Ms Yingluck's administration has endured more than two months of street demonstrations that protest leaders say are aimed at erasing her family's political influence. Allies of Ms Yingluck's brother, Thaksin Shinawatra, have won the past five elections, including two since his ouster in a 2006 coup. Eight people have been killed in clashes between rival political groups in the past month.
The prospect of prolonged tension will make most investors reluctant to buy Thai shares despite cheaper prices, said Prasert Khanobthamchai, the chief investment officer at Kasikorn Asset Management Co, Thailand's biggest private money manager with about $28 billion of assets.
Political uncertainty may delay the government’s 2 trillion baht ($60.6 billion) infrastructure spending plan and curtail private investment, while the weak baht will raise import costs, caretaker Finance Minister Kittiratt Na-Ranong said on Friday.
"Market sentiment is very weak with no foreseeable solution on the current political deadlock in the near future," Kasikorn's Prasert said by phone on Thursday.
Global investors sold a net $6.2 billion of Thai equities in 2013, the most since Bloomberg began compiling the data in 1999. Foreigners bought a net $3.8 million on Thursday, the first inflow in three days.
Thai stocks have rebounded after past periods of political tension. While the SET Index lost as much as 13% in four months after military leaders sent tanks to block Bangkok's Government House and said they had seized control of the capital on Sept 19, 2006, the gauge recouped its losses by May 2007. The SET lost 11% amid protests in the first half of 2010, then rallied 46% during the following 12 months.
Aberdeen favours energy stocks, including PTT Exploration & Production Pcl (PTTEP), along with power producers, health-care service providers, phone companies and insurers, Mr Adithep said.
"Thailand has come out strongly from a number of big crises in the past few years," he said. "I don't expect the political tension will turn much more violent."