Market Update: War on oil prices sends SET down to lowest point in four years

The Stock Exchange of Thailand (SET) was down by 92.37 points, or 6.77 per cent, with a trading value of 56.43 billion baht, to close at 1272 at the intermission on Monday. Asian bourses were also down by an average 3.5 per cent, as Russia failed to agree with the Organization of the Petroleum Exporting Countries (OPEC) on production cuts.  

IHS Markit Crude Oil Market Service said that global oil demand will decline by 3.8 million barrels per day in the first quarter of 2020 compared to a year prior. The slowdown in demand prompted OPEC to propose a cut in oil production by 1.5 million barrels per day. However, Russia refused the proposal.

Oil prices plunged on Monday by 30 per cent to a four-year low while representing the biggest one-day drop since the Gulf War in 1991. As the trading session continued on Monday, US West Texas Intermediate (WTI) crude oil dropped 31.8 per cent to US$28.16 per barrel.

This inevitably takes away any investment incentive that is still left after the coronavirus outbreak. Investors are selling their shares to keep, and flocking to safe haven assets for savings.

Yuanta Securities said the SET dropped in line with other bourses in Asia, as Saudi Arabia has already launched an all-out oil price war, and said they are planning to discount their crude oil and raise production. Energy shares account for 30 per cent of the index, while internal factors such as the new stimulus measures set to come out on Tuesday did not hit the spot for businesses, they added. With experts warning that Thailand might be entering the “third stage” of the outbreak — defined as mass infection in a country, the securities firm said it is hard to see the SET recovering in the afternoon session on Monday. 

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