Thai Stock Market Takes a Dive Amidst LTF Redemptions and Global Tax Changes
The Thai Stock Exchange of Thailand (SET) index plummeted on January 2nd, 2025, closing at 1,379.85 points—a importent drop of 20.36 points (1.45%). Trading volume reached a considerable 36.896 billion baht. Analysts attribute this sharp decline too a confluence of factors, primarily the massive redemption of long-term equity funds (LTFs) and the implementation of a global minimum tax.
The day’s trading saw the index fluctuate, reaching a low of 1,378.44 points and a high of 1,399.35 points. Of the securities traded, 180 saw increases, 330 experienced decreases, and 154 remained unchanged.
According to Kornphat Worachet, head of research at Krungsri Securities, the market’s downturn stemmed from two key issues. First, the looming maturity of a substantial portion of LTFs—approximately 68 billion baht out of a total 240 billion baht outstanding—created significant market uncertainty. Worachet noted that ”the overall stock market is still under pressure from LTF funds limited during 1-2 days,” highlighting the short-term impact of these redemptions. The original cost basis for these funds was significantly higher, at an index of 1,642 points, exacerbating the sell-off.
The second major factor was the introduction of a 15% global minimum tax on multinational corporations, effective January 1, 2025. This prompted significant selling pressure on large-cap stocks, particularly those with substantial international operations and previously lower effective tax rates. While the immediate impact is still being assessed, the sell-off of DELTA and the perceived panic selling of GULF shares underscore the market’s sensitivity to this change. Worachet explained that “initially it is believed that the impact may not be much. Must wait for clear details to come out first.”
Looking ahead, analysts predict a relatively stable market in the near term, though with reduced volatility. Support levels are anticipated around 1,375-1,370 points, with resistance at 1,400-1,405 points.
Top Performing Securities
Here’s a look at the five securities with the highest trading volume:
- DELTA: Trading volume of 6,237.71 million baht, closing at 139.00 baht (a decrease of 13.50 baht).
- GULF: Trading volume of 1,792.98 million baht,closing at 56.75 baht (a decrease of 2.75 baht).
- PTTEP: Trading volume of 1,598.46 million baht,closing at 124.50 baht (an increase of 5.50 baht).
- CPALL: Trading volume of 1,299.17 million baht, closing at 55.75 baht (unchanged).
- CCET: Trading volume of 1,049.92 million baht, closing at 9.85 baht (a decrease of 0.25 baht).
By Saowalak Phon/sasithorn Simaporn
The Thai stock market experienced a notable downturn on January 2nd, 2025, with the SET index closing considerably lower amidst concerns surrounding Long-Term Equity Fund (LTF) redemptions and the implementation of a global minimum tax. This article’s author, Saowalak Phen, spoke with Dr. Chanvit Baifkadi, a renowned economist and financial analyst specializing in Southeast Asian markets, too gain deeper insights into these market movements.
Declining Stock Prices: A Confluence of Factors
Saowalak Phen: Dr. Baifkadi,the Thai stock market witnessed a considerable drop on January 2nd. Can you shed some light on the key factors contributing to this decline?
Dr. Chanvit Baifkadi: Certainly, Saowalak.This downturn is primarily attributable to two interconnected factors: the large-scale redemption of LTFs and the introduction of the global minimum tax.
We’ve seen a critically importent portion of LTFs reaching maturity, leading to a considerable outflow of funds from the market. This, coupled with the uncertainty surrounding the global minimum tax’s implications for multinational corporations, has sown seeds of doubt among investors.
LTF Redemptions: A Short-Term Shockwave
Saowalak Phen:
How significant is the impact of LTF redemptions on the market, and do you foresee this trend continuing?
Dr. Chanvit Baifkadi: The sheer volume of LTF redemptions is substantial, with approximately 68 billion baht nearing maturity. This creates immediate selling pressure, driving down stock prices, especially as the original cost basis for these funds was considerably higher.
However, I anticipate this to be a short-term phenomenon. Once the initial wave of redemptions subsides, we should see market stability return.
Global minimum Tax: Uncertainty Hangs Heavy
Saowalak Phen:
The implementation of a global minimum tax has been a hot topic. Can you elaborate on its implications for the Thai market, particularly for large-cap stocks?
Dr. Chanvit Baifkadi: This tax represents a seismic shift in the global corporate tax landscape. While the immediate impact is still being assessed, it’s likely to disproportionately affect large companies with extensive international operations and previously low effective tax rates.
We’ve already seen selling pressure on certain large-cap stocks like DELTA and GULF, reflecting investor nervousness about potential tax liabilities.
Outlook: Cautious Optimism
Saowalak Phen:
What is your outlook for the Thai stock market in the near future?
Dr. chanvit Baifkadi:
I remain cautiously optimistic. While these recent events have shaken the market, I believe it will gradually stabilize in the short term. we should expect reduced volatility, with support levels around 1,375-1,370 points and resistance around 1,400-1,405 points.
Long-term,the Thai economy’s resilience and growth potential remain attractive for investors. however, close monitoring of global economic trends and the evolving impact of the global minimum tax will be crucial for informed investment decisions.
Saowalak Phen:
Thank you, Dr. Baifkadi,for sharing your valuable insights with our readers.
