Thai economic crisis and its impact on the Thai stock market trends

Abstract

The Stock Exchange of Thailand (SET) was first established in 1961 as part of Thailand’s National Economic and Social Development Plan for the purpose of enhancing the country’s economic growth. The operating performance of the SET grew steadily until the first boom years of 1986-1989, which made the market capitalization changed much higher in its value. This remarkable rate of growth fascinated both local and foreign stock investors who invested their money heavily in the stock market since then. In late 1996, Thailand suffered a decrease in exports, which led to high deficit in the balance of payment. Furthermore, the financial sector started to have problems in increasing foreign debts. In 1997, the economic problems followed the devaluation of the Thai currency and the increase in volume of non-performing loans, which made the performance outcome of the listed member companies of the SET went down. These problems directly and strongly impacted the stock investors’ confidence, led to the decline in the Thai stock market trading volume and caused the SET Index hit the lowest point in its history in September 1998. The stock market has an important role not only in helping the country to accelerate its economic growth, but also being an important indicator that can reflect the current economic performance of that country. The country’s economic performance can be shown through the changing of the stock market index, which is crucial regarding to the decisions making and confidence of the investors. The primary aim of this research is to analyze the Thai stock market trends as Thailand moves into the twenty-first century after facing the peak of economic crisis. Most data provided are the comparison of the economic data from the years 1996-2000 which can reflect the success level of the Thai governments’ measures in an effort to resolve the economic problems and encourage economic recovery in order to bring back public confidence.