Baht Rises to 13-Year High as Growth Outlook Boosts Inflows
Sept. 6 (Bloomberg) -- Thailand's baht rose to the strongest level since 1997 as the outlook for economic growth and speculation interest rates may rise further encouraged investors to pour money into the nation's stocks and bonds.
The currency gained 0.2 percent to 31.13 per dollar as of 3:26 p.m. in Bangkok and touched 31.06, according to data compiled by Bloomberg. That was its strongest August 1997, when the currency's collapse triggered the Asian financial crisis.
Thailand's benchmark SET Index has rebounded 30 percent since May, when a crackdown by troops ended two months of deadly anti-government protests. Global funds bought $298 million of Thai stocks last week, the biggest net purchase in almost six months, helping send the SET to its highest level since November 1996. The index added 0.9 percent to 938.40.
"There have been large inflows of foreign funds into both Thailand's bonds and stock markets," said Rapee Sucharitakul, executive chairman of Kasikorn Asset Management Co., which oversees the equivalent of $18 billion in assets, said in an interview today. "The Thai economy has a very strong outlook as exports remain strong and easing political tension will boost consumption and investment."
The Bank of Thailand, which predicts the economy will expand as much as 7.5 percent this year in what would be the fastest pace since 1995, increased its policy rate to 1.75 percent on Aug. 25. The bank may boost the one-day bond repurchase rate to 2 percent by the end of the year, according to the median forecast of 12 economists surveyed by Bloomberg.
Gross domestic product expanded 9.1 percent in the second quarter from a year earlier after gaining 12 percent in the previous three months, the best two quarters of growth since 1995, according to government data.
Investors 'Still Underweight'
The baht has gained 2.9 percent in the past month, the best performance among major currencies in Asia, as easing political tension and improving earnings attracted foreign investment.
"With the political unrest, many foreign institutional investors are still underweight on Thailand," said Jessada Sookdhis, a fund manager at Ayudhya Fund Management Co., which manages about $2.3 billion in assets. "Since last month, we have seen comparatively higher inflows into Thailand. The political situation is very calm here now."
Overseas investors sold a record $1.81 billion of Thai stocks in May, when fighting between troops and anti-government protesters left at least 89 people dead and sparked riots and arson attacks across the capital, Bangkok.
Prime Minister Abhisit Vejjajiva has faced demonstrations since taking power in a 2008 parliamentary vote after a court dissolved the ruling party linked to ex-leader Thaksin Shinawatra for election fraud. The fugitive billionaire and his allies have won the past four elections.
Room for Inflows
Emerging-market funds have invested less in Thai stocks and bonds this year than any other Asian market except Singapore, Barclays Capital Plc wrote in a report on Aug. 27, citing data from EPFR Global. Funds have invested $765 million in Thai stocks and $324 million in local bonds this year through Aug. 25, the data show.
Foreign clients still had "slim" positions in Thailand, suggesting there is room for further inflows, Bangkok-based KGI Securities Pcl wrote in a report written after meetings last week with clients in Singapore and Malaysia.
The pace of currency appreciation may slow as policy makers look for ways to deter speculators amid concern a strengthening baht will damage exports, which account for two-thirds of the economy.
Overseas shipments rose 21.2 percent in July from a year earlier, slowing from a gain of 47.1 percent in June, according to the central bank. Commerce Minister Porntiva Nakasai last month said the baht's strength is a "risk" to exports, and the central bank should "take care" of the currency.
Targeting Speculators
"If there is too much speculation, the government won't tolerate it," Abhisit said on Sept. 2, after meeting with economic ministers to discuss the baht. Central bank Governor Tarisa Watanagase on the same day said she will watch out for speculators, adding that existing measures are sufficient to counter volatility.
Thai policy makers last imposed limits on funds entering the nation in December 2006 to slow baht gains and protect exporters, a measure that led to a divergence between the onshore traded value of the currency and the offshore rate.
In 1997, Thailand triggered the Asian financial crisis when it devalued the baht to shore up a faltering economy, abandoning its policy of pegging the currency to the U.S. dollar. Investors sold Asian stocks and currencies, causing neighboring economies including Malaysia and Singapore to shrink, and leading Thailand, South Korea and Indonesia to seek bailouts from the International Monetary Fund.
"The authorities will try to slow the speed of gains, but won't be able to reverse the appreciation trend because it's a rising trend for all regional currencies," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. "They seem to have stepped up verbal warnings as the pace of appreciation in the baht has been quite rapid recently."
--With assistance from Anuchit Nguyen in Bangkok and David Yong in Singapore. Editors: Tony Jordan, Ven Ram
Sept. 6 (Bloomberg) -- Thailand's baht rose to the strongest level since 1997 as the outlook for economic growth and speculation interest rates may rise further encouraged investors to pour money into the nation's stocks and bonds.
The currency gained 0.2 percent to 31.13 per dollar as of 3:26 p.m. in Bangkok and touched 31.06, according to data compiled by Bloomberg. That was its strongest August 1997, when the currency's collapse triggered the Asian financial crisis.
Thailand's benchmark SET Index has rebounded 30 percent since May, when a crackdown by troops ended two months of deadly anti-government protests. Global funds bought $298 million of Thai stocks last week, the biggest net purchase in almost six months, helping send the SET to its highest level since November 1996. The index added 0.9 percent to 938.40.
"There have been large inflows of foreign funds into both Thailand's bonds and stock markets," said Rapee Sucharitakul, executive chairman of Kasikorn Asset Management Co., which oversees the equivalent of $18 billion in assets, said in an interview today. "The Thai economy has a very strong outlook as exports remain strong and easing political tension will boost consumption and investment."
The Bank of Thailand, which predicts the economy will expand as much as 7.5 percent this year in what would be the fastest pace since 1995, increased its policy rate to 1.75 percent on Aug. 25. The bank may boost the one-day bond repurchase rate to 2 percent by the end of the year, according to the median forecast of 12 economists surveyed by Bloomberg.
Gross domestic product expanded 9.1 percent in the second quarter from a year earlier after gaining 12 percent in the previous three months, the best two quarters of growth since 1995, according to government data.
Investors 'Still Underweight'
The baht has gained 2.9 percent in the past month, the best performance among major currencies in Asia, as easing political tension and improving earnings attracted foreign investment.
"With the political unrest, many foreign institutional investors are still underweight on Thailand," said Jessada Sookdhis, a fund manager at Ayudhya Fund Management Co., which manages about $2.3 billion in assets. "Since last month, we have seen comparatively higher inflows into Thailand. The political situation is very calm here now."
Overseas investors sold a record $1.81 billion of Thai stocks in May, when fighting between troops and anti-government protesters left at least 89 people dead and sparked riots and arson attacks across the capital, Bangkok.
Prime Minister Abhisit Vejjajiva has faced demonstrations since taking power in a 2008 parliamentary vote after a court dissolved the ruling party linked to ex-leader Thaksin Shinawatra for election fraud. The fugitive billionaire and his allies have won the past four elections.
Room for Inflows
Emerging-market funds have invested less in Thai stocks and bonds this year than any other Asian market except Singapore, Barclays Capital Plc wrote in a report on Aug. 27, citing data from EPFR Global. Funds have invested $765 million in Thai stocks and $324 million in local bonds this year through Aug. 25, the data show.
Foreign clients still had "slim" positions in Thailand, suggesting there is room for further inflows, Bangkok-based KGI Securities Pcl wrote in a report written after meetings last week with clients in Singapore and Malaysia.
The pace of currency appreciation may slow as policy makers look for ways to deter speculators amid concern a strengthening baht will damage exports, which account for two-thirds of the economy.
Overseas shipments rose 21.2 percent in July from a year earlier, slowing from a gain of 47.1 percent in June, according to the central bank. Commerce Minister Porntiva Nakasai last month said the baht's strength is a "risk" to exports, and the central bank should "take care" of the currency.
Targeting Speculators
"If there is too much speculation, the government won't tolerate it," Abhisit said on Sept. 2, after meeting with economic ministers to discuss the baht. Central bank Governor Tarisa Watanagase on the same day said she will watch out for speculators, adding that existing measures are sufficient to counter volatility.
Thai policy makers last imposed limits on funds entering the nation in December 2006 to slow baht gains and protect exporters, a measure that led to a divergence between the onshore traded value of the currency and the offshore rate.
In 1997, Thailand triggered the Asian financial crisis when it devalued the baht to shore up a faltering economy, abandoning its policy of pegging the currency to the U.S. dollar. Investors sold Asian stocks and currencies, causing neighboring economies including Malaysia and Singapore to shrink, and leading Thailand, South Korea and Indonesia to seek bailouts from the International Monetary Fund.
"The authorities will try to slow the speed of gains, but won't be able to reverse the appreciation trend because it's a rising trend for all regional currencies," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. "They seem to have stepped up verbal warnings as the pace of appreciation in the baht has been quite rapid recently."
--With assistance from Anuchit Nguyen in Bangkok and David Yong in Singapore. Editors: Tony Jordan, Ven Ram