The Thai stock market is expected to move downward next week (Feb 22 – Feb 26) because of the country’s political uncertainty and the US Federal Reserve’s decision to raise the interest rate, the Kasikorn Research Centre (KRC) reported on Sunday.

The leading think tank said investors were closely monitoring the Thaksin assets seizure case. The Supreme Court on Feb 26 is scheduled to deliver its verdict on whether the frozen assets worth 76 billion baht of fugitive prime minister Thaksin Shinawatra and his family will be seized by the state.

The KRC said other external factors affecting the Thai bourse next week were the direction of the US dollar, the fluctuation of oil and consumer product prices, the movements of regional stock markets and economic figures to be released by the US and China.

The support level of the Stock Exchange of Thailand’s composite index should be 688 to 676 points while its resistance level should stand at 702 to 708 points.

The Thai baht would likely move in the range of 33.00 to 33.40 baht per dollar next week.

However, significant downside risks remain should political instability resurface in Thailand and the global decline proved more protracted or steeper than now expected

Inflation has been easing with the slowdown in economic activity and the decline in oil and food prices. After peaking at 9.3 percent in July 2008, 12-month inflation fell to only 0.4 percent in December, although the average for 2009 at 5.5 percent was roughly double the level in 2007. Core inflation averaged 2.3 percent in 2008, within the central bank’s target of 0-3.5 percent. In January and February, prices declined 0.3 percent from the first two months of 2008, but this has been driven primarily by fuel prices, with other prices still increasing year-on-year. Given the increased excess capacity in the economy and the continuing decline in global oil and food prices this year, inflation in 2009 is expected to be negligible.
Export volumes are projected to contract 16 percent in 2009 after a 6 percent expansion in 2008. Exports of services, more than half of which were accounted for by tourism receipts (around 8 percent of GDP) will also be heavily impacted by the slowdown in arrivals from advanced countries (40 percent of total tourists). Accordingly, exports of services are projected to contract by 6.6 percent this year. Import volumes should contract more than exports due to businesses running down inventories and a contraction in overall investment and consumption of imports. Net foreign demand will nevertheless contribute negatively to growth since in real terms exports represent a much larger share of GDP than imports.