The ongoing baht depreciation and rising US bond yields are pressuring the Stock Exchange of Thailand (SET) and encouraging capital outflows after the benchmark index retreated from the key psychological level of 1,600 points, say analysts.Veerawat Virojphoka, senior director of securities analysis at FSS International Investment Advisory Co, said the higher probability of the US Federal Reserve hiking interest rates amid rising inflation has prompted capital outflows from emerging markets, including the Thai bourse.
Markets now assign a 72% probability of a December Fed rate hike. The Bank of Thailand seems to have limited space to increase the rate given concerns it could hurt the fragile Thai economy, said Mr Veerawat.
Meanwhile, the US 10-year Treasury yield surged above 4.56%, reflecting persistent worries over long-term interest rates and inflation.
"Rising US bond yields are exerting direct pressure on global money and capital markets, including Thailand," Asia Plus Securities (ASPS) said in a research note.
Foreign investors have sold Thai bonds valued at around 11 billion baht month-to-date, including 6.5 billion baht in net selling on Monday, pushing Thailand's 10-year bond yield up by 8 basis points to 2.29%.
