The Stock Exchange of Thailand (SET) experienced a significant decline on Monday, with the index plummeting nearly 3% amid fears of an impending US recession and escalating tensions in the Middle East. The Thai bourse dropped 38.41 points, or 2.93%, closing at 1,274.67 points. Meanwhile, the Nikkei index in Japan faced an unprecedented one-day drop, falling over 4,400 points for a total decrease of 12%.
MSCI’s broadest gauge of Asia-Pacific equities outside Japan fell by 3%, marking its worst performance since mid-June 2022. Additionally, the Asian emerging market index, heavily influenced by Taiwan, also saw a drop of 3%, reaching a three-month low.
“Recent US economic indicators, including labor statistics and the Purchasing Managers’ Index (PMI), have sparked recession worries,” stated a market analyst from Asia Plus Securities (ASPS).
Concerns have intensified regarding the slowing US economy and speculation that the Federal Reserve may have delayed necessary interest rate cuts. A US jobs report released last Friday revealed a significant slowdown in hiring for July, with non-farm payrolls rising by only 114,000 – far below the anticipated 175,000 – and the unemployment rate climbing to 4.3%, exceeding predictions of 4.1%.
“This uptick in unemployment has officially triggered the Sahm Rule, indicating that the economy is entering a recession,” noted a chief strategist at Tisco Securities.
ASPS further indicated that economic support measures will likely be implemented to combat potential recessionary pressures in the US.
“The Federal Reserve may cut interest rates more than twice this year, potentially reducing rates by 0.5% from the current 5.5%,” added the ASPS analyst.
In terms of regional market performance, the Thai bourse has only slipped 0.6% this month so far, notably steadier compared to the Japanese stock market’s 8.2% drop and declines in the Nasdaq (-4.7%) and South Korea (-3.4%).
Investors in Thailand are also keeping a close watch on domestic political developments, while concerns over high valuations from the artificial intelligence sector and escalating geopolitical tensions in the Middle East persist. Israel is preparing for potential retaliation from Iran and regional militias following the recent attacks on Hezbollah and Hamas officials.
Despite these challenges, regional currencies gained strength as the US dollar weakened amid rising expectations for deeper rate cuts by the Fed. The Malaysian ringgit surged 2.3% to its highest value since late April 2022, marking its best performance since January 2016. Similarly, China’s yuan appreciated up to 0.8%, reaching its highest point of the year.
The Thai baht and Philippine peso each saw a 0.4% increase, while the Singapore dollar, typically more stable, also jumped 0.4%, achieving its highest level so far this year.
