The Stock Exchange of Thailand (SET) index plummeted nearly 3% on Monday as other Asian markets sank to multi-year lows amid fears that the US economy may be heading into a recession, compounded by escalating tensions in the Middle East.
On Monday, the Thai bourse dropped by 38.41 points, or 2.93%, finishing at 1,274.67 points. Meanwhile, Japan’s Nikkei index recorded its largest single-day point loss in history, plummeting over 4,400 points for a 12% decline.
MSCI’s broadest benchmark for Asia-Pacific equities outside of Japan fell by 3%, marking its worst performance since mid-June 2022. An index representing Asian emerging markets, which includes Taiwan—accounting for almost a quarter of its weight—declined by 3%, hitting a three-month low.
“Key US economic indicators, particularly labor statistics, the Purchasing Managers’ Index (PMI), and consumer purchasing power, have heightened concerns about a potential recession,” stated Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities (ASPS).
According to him, these indicators intensified worries regarding a slowing US economy and raised doubts about whether the Federal Reserve (Fed) has delayed too long in reducing interest rates.
A US jobs report released on Friday revealed that hiring slowed considerably in July, with unemployment climbing to its highest rate in nearly three years. Non-farm payrolls in July increased by only 114,000, falling short of the market consensus of 175,000, while the unemployment rate rose to 4.3%, exceeding the expected 4.1%.
“The increase officially activated the Sahm Rule, which suggests that the economy is entering a recession when the three-month moving average of the unemployment rate rises 0.5% or more above its 12-month low, raising concerns about the US economy,” explained Apichart Phubunjerdkul, head of strategy research at Tisco Securities.
ASPS further indicated that economic support policies will be enacted to stave off a recession in the US.
“The Fed might implement more than two interest rate cuts this year, reducing US rates by 0.5% from the current rate of 5.5%,” added Mr. Therdsak.
Thus far in August, the Thai bourse has seen a decline of 0.6%, much less volatile compared to the Japanese stock market, which fell by 8.2%, alongside the Nasdaq (-4.7%) and South Korea (-3.4%).
InnovestX Securities pointed out that as the Thai market anticipates a clearer political landscape domestically, investors are also concerned about inflated valuations due to the artificial intelligence surge. Additionally, rising tensions in the Middle East are contributing to a risk-averse sentiment, with Israel preparing for a potential retaliation from Iran and regional militias following the recent killings of Hezbollah and Hamas officials.
In response to the weakening dollar and increased speculation about deeper rate cuts by the Fed, regional currencies strengthened. The Malaysian ringgit surged 2.3% to its highest level since late April last year—marking its best performance since January 2016—while China’s yuan rose by as much as 0.8%, reaching its highest level this year.
The Thai baht and Philippine peso both appreciated by around 0.4%, and the usually stable Singapore dollar also jumped 0.4%, trading at its highest level thus far this year.
