Thai baht falls but stocks recover as protests continue

Published: 4:02 AM, December 3, 2013
Updated: 4:00 AM, December 4, 2013

BANGKOK — The Thai currency fell to a 12-week low yesterday as protestors seeking to oust Prime Minister Yingluck Shinawatra vowed more unrest, but stocks rebounded from early weakness to end in positive territory on late bargain-hunting.

“We are seeing chaotic scenes on television. Investors are not sure how it will end,” said Mr Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities in Japan.

The baht lost 0.3 per cent to 32.15 per US dollar in late Asian trading after having fallen to 32.29 earlier in the day, the weakest level since Sept 9, according to Bloomberg data. It may break through a three-year low of 32.48 reached on Sept 6 in a week or so if the protests continue, said Mr Soma and other analysts such as Credit Agricole’s head of global foreign exchange strategy Mitul Kotecha in Hong Kong. The baht weakened 2.9 per cent last month, the most since May.

Thailand’s SET Index rose 0.2 per cent to close at 1,374.26 after falling as much as 1.1 per cent. The SET had retreated 5 per cent last month as foreign investors sold the most shares among 10 Asian markets tracked by Bloomberg.

Despite the recent market nervousness, investors are pricing in short-term turbulence rather than a long-drawn political and economic crisis, analysts said.

“There hasn’t been a large portfolio outflow from Thailand. There has been currency hedging and that’s typically what investors do when they are concerned about the short term effect on markets,” said Mr Mirza Baig, head of currency and rates research at BNP Paribas in Singapore.

“What’s not in the price is the possibility that this drags on into a very growth-debilitating medium-term standoff,” he added.

Analysts say investors are not panicking because they are prepared for short bursts of political instability in a country that has witnessed numerous coups and several constitutional changes over the past few decades.

“The uncertainty discount is already in the price,” said HSBC equity strategist Devendra Joshi in Hong Kong. But he added that “we are underweight Thai equities and prefer other opportunities in ASEAN which investors could rotate into,” pointing to Indonesia and the Philippines as good picks. AGENCIES