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Foreign Investors Shift to Net Buying After Uptick Rule

Foreign investors transitioned from net selling 15 billion baht in June to net buying nearly 5 billion baht last week. This shift followed the implementation of the uptick rule on July 1, which significantly reduced short selling from an average of 6.2 billion baht per day last month to 1.5 billion baht per day.

The uptick rule, aimed at controlling short selling transactions to reduce volatility in securities trading, led to a 25% drop in the average daily trading value of the Stock Exchange of Thailand (SET), now averaging 31 billion baht. Prakit Siriwattanaket, managing director of Merchant Partners Asset Management, noted the impact on trading volumes.

Foreign investors’ net buying of Thai stocks amounted to nearly 5 billion baht, making up 46% of total trading value, down from 55%. Meanwhile, retail investors’ participation increased to 35% from 31%. Much of the foreign buying was conducted through non-voting depository receipts (NVDR).

“The uptick rule increases transaction costs for retail investors as they must offer a higher price for shares than the previous price. However, more time is needed to evaluate the effectiveness of this measure in curbing short selling transactions,” said Prakit.

According to Asia Plus Securities (ASPS), foreign investors were net buyers of 53,946 contracts of SET50 Futures last week, a reversal from net selling 72,813 contracts in the previous month. ASPS highlighted that many central banks might continue cutting interest rates in the third quarter, with the FedWatch Tool predicting the Federal Reserve will reduce rates twice this year to 5.0% and three times in 2025, lowering US rates to 4.25%.

“Fund flows might return as foreigners could gain additional profits from the exchange rate, especially since Thai stocks are still valued inexpensively and the economy is gradually recovering,” ASPS stated in a research note.

The US 10-year bond yield has been higher than the Thai government bond yield since mid-2022, causing foreign funds to flow out and the baht to depreciate. Foreign investors have divested around 300 billion baht in Thai stocks and another 200 billion in debt instruments.

This week, ASPS recommends fundamental stocks frequently bought by foreign investors through NVDR, particularly those benefiting from a strengthening baht. These include PTT Exploration and Production (PTTEP), Bangkok Bank (BBL), CP All, Kasikornbank (KBANK), Global Power Synergy (GPSC), BGrimm Power (BGRIM), Thai Oil (TOP), and Central Retail Corporation (CRC).

In attendance at the announcement were key officials from the Stock Exchange of Thailand, various brokerage firms, and prominent asset management companies, who provided insights into the recent market developments and future projections.

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