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Baht hits weakest level in nearly 4 years as SET continues slump

The baht saw its weakest level in nearly four years and the Stock Exchange of Thailand continued its losses on pressure from the Federal Reserve's announcement on planned tapering of its monetary stimulus and local political unrest.

The baht has lost 4.6 per cent in the past two months and the SET Index dropped 9.1 per cent, according to Bloomberg.

The baht yesterday opened at 32.69-32.71 per US dollar before weakening to 32.75, the lowest since early March 2010, according to a treasurer from a commercial bank. The Thai currency finally appreciated slightly yesterday afternoon to 32.66-32.68.

There were no new factors affecting the baht's movement. The SET Index yesterday fell 1.2 per cent to close at 1,326 points and tourism stocks also extended losses. Hotel owner Minor International slumped 6.3 per cent.

More than 1,000 anti-government protesters surrounded caretaker Prime Minister Yingluck Shinawatra's home in Bangkok as she criticised the Democrat Party's plan to boycott the election scheduled for February 2. Protesters yesterday gathered around two buildings to block candidates from registering for the election.

"Investors aren't buying the Thai baht if this political situation continues," Bloomberg quoted Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp in Bangkok, as saying. The baht may gradually weaken towards 32.9 per dollar as the political conflict threatens the economy, he said.

The commercial-bank treasurer said: "Volume was thin, prompting the currency to swing. It's the last week of the year and Christmas, when there are rare transactions in foreign markets. There's no sign of a move by the BOT [Bank of Thailand] as we've been moving in line with the regional peers." The source expects the baht to move in a range of 32.50-32.75 this week and weaken to 33 after New Year's.

An analyst at Commonwealth Bank of Australia said concerns on Thailand's political uncertainties might encourage investors to sell the baht to mitigate risk as markets remain negative about the baht's direction.

Usara Wilaipich, senior economist at Standard Chartered Bank (Thai), said the baht was forecast to depreciate from now to the middle of next year, given the local political problem and a reduction of the US Federal Reserve's monetary stimulus.

"Although foreign investors have sold assets in Asian countries, including Thailand, that happens gradually. The dollar's appreciation has been seen clearly after the Fed's announcement on the tapering of QE," or quantitative easing, she said.

"In the first half [of 2014], the baht could weaken to 33-34 per dollar and then appreciate in the latter half on expectation of improved Thai exports and easing of the political situation." If the political problem remains unresolved, however, capital which might have move into Thailand could go elsewhere in Southeast Asia, she added.

Chongrak Rattanapian, executive chairman of Kasikorn Asset Management (KAsset), said investors should diversify, particularly to the United States, Europe or Japan, but investing in Thailand remained attractive. He forecast the Thai economy to grow by 4.0-5.0 per cent next year. This year's growth is estimated at 2.6-3.0 per cent. Political factors should be watched as they could affect investment in the government's mega-projects.

Prasert Khanobthamchai, executive vice president at KAsset, said foreign markets would be more attractive in 2014 on easing concern over the US stimulus and recovery of major economies, while the political situation remained a major risk to the Thai stock market.

The SET Index is targeted at 1,520 points next year, overweighting export-oriented, commodity, property and tourism-related stocks if prices lower to attractive levels, he said.

Win Udomrachtavanich, chief executive officer of One Asset Management, said the index was expected to rise to 1,350-1,400 points in the remainder of this month after dropping by more than 5 per cent month on month in November amid the political protests. The stock market is expected to see limited downside risk as it already factored in the political problem and the US QE's tapering.

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