TPI ruling fails to halt slide on stock market

THE Central Bankruptcy Court's ruling on the historic Thai Petrochemical Industry Plc case failed to shore up the stock market yesterday, as investors took it as a compromise or face-saving measure for both creditors and the debtor.

Yet a securities analyst at Nava Vickers Ballas Securities (Thailand) Co Ltd attributed the market's rapid decrease by 14.17 points, or 3.5 per cent, as a result of programme selling by Japanese institutional investors, who were keen to close their books by the end of this month.

Selling pressure was particularly strong in the morning session before the Central Bankruptcy Court's ruling on TPI, which the markets expected to be in favour of creditor banks.

When the ruling was announced that the company was insolvent, but the decision about the company's planner would be deferred until next month, the SET index continued to fall.

The result was big losses at the end of a day of drama for the Thai judicial system.

The banking sector was down nearly 6 per cent on retail selling. The end result was worst felt by Bangkok Bank (BBL), which fell Bt3.75 to close at Bt36.50.

Bangkok Bank is a major creditor of TPI, which is saddled with US$3.5 billion (Bt132.75 billion) of debt.

Among other losers were Thai Farmers Bank, down Bt1.50 to Bt33.75 and Siam Commercial Bank, down Bt1.25 to Bt30.50.

Foreign investors also joined yesterday's selling spree, evidenced by a Bt6 decrease in BBL's share price on the foreign board to close the day at Bt62.

The Nava Vickers Ballas analysts said the sharp fall in the stock market was largely a result of Japanese hedge funds looking to close their balance sheets by the end of March.

"The result failed to impress the market, as the ruling seems to be a relative compromise, although the court has ruled in favour of the creditors," said the analyst.

"Additionally, the rift between Finance Minister Tarrin Nimmanahaeminda and Bank of Thailand governor MR Chatu Mongkol Sonakul aggravated the market, as investors questioned whether the head of the central bank would resign."

Veerachai Krongsamsri, senior analyst at UOB Securities (Thailand) Co Ltd, said the court ruling was not "once-and-for-all" and prolonged TPI's debt restructuring, since it would take more than three months to complete the process.

"Although the creditors seem to be winners, they win with conditions. This allows TPI a chance to work out a deal to become planner of the rehabilitation plan.

"But this deal, however, will need two-thirds support from creditors, otherwise they will pick their own planner," he said.

The market's fall yesterday was attributed to investors' eagerness to lock in profit from some banking stocks, which rose sharply in a past few days on speculation the creditors would be the ultimate winners in TPI's case, he said.

The analyst believed the downside trend in the market would be short-lived after the index fell below 388 points. The next resistance level was at 375, he said.

"The panic selling was triggered when local investors saw the court's decision to give management control to the current management team as a bad move, as Thai Petrochemical may try to find a way out of the restructuring process," said Tom Phaibool, head of research at Tisco Securities.

Tom said it would take time for investors to realise the court verdict provided the best solution for both the company and its creditors, and that the bankruptcy court would not allow Thai Petrochemical to flee the restructuring process.

A rebound in bank stocks was likely in the near future, he said.