Thai Stocks, Baht Drop as Funds Trim Holdings on Political Risk

via CAAI

January 25, 2011

By Yumi Teso and Anuchit Nguyen

Jan. 25 (Bloomberg) -- Thailand’s baht slid to its weakest level since September and stocks fell for a fourth day after global funds trimmed holdings of shares and nationalists vowed to rally indefinitely over a border dispute with Cambodia.

The currency declined for a fourth straight day after exchange data showed overseas investors sold $131 million more Thai equities than they bought yesterday. The SET Index yesterday had its biggest slump since October 2009 after the People’s Alliance for Democracy, which seized Bangkok’s airports for eight days in 2008, said its protest aimed to pressure the government to revoke a border agreement with Cambodia.

“Protests highlight the political risk and that’s weighing on the baht,” said Dariusz Kowalczyk, a Hong Kong-based economist with Credit Agricole CIB. “Asian currencies are highly correlated with equity flows from overseas.”

The baht weakened 0.1 percent to 30.97 per dollar as of 3:34 p.m. in Bangkok, according to data compiled by Bloomberg. The currency touched 31.05, the weakest level since Sept. 9. The SET index lost 0.7 percent to 957.08, extending yesterday’s 4.3 percent drop.

The stock index climbed almost 41 percent last year as the nation’s fastest economic growth since 1995 attracted a net $2.8 billion from overseas investors, the most since 2005. Gross domestic product probably increased 8 percent in 2010, Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said Jan. 21.

Abhisit’s Warning

“Some investors just take an opportunity of negative news on political fronts to join the selloff,” said Visit Ongpipattanakul, an investment strategist at Trinity Securities Co. in Bangkok. “Overseas investors are taking profit on equities in Thailand and other regional markets, which were among the best performing last year.”

Thailand must drop out of the United Nations’ World Heritage Committee, cancel a 2000 agreement with Cambodia on border negotiations and urge Cambodians to withdraw from disputed border areas, protest leader Chamlong Srimuang said yesterday.

Prime Minister Abhisit Vejjajiva warned nationalists not to disrupt government functions. He said yesterday he wouldn’t bow to protesters’ demands because that would put the country “at risk of losing” contested land and may lead to fighting.

“The return of political tensions outside parliament would add to PM Abhisit’s worries and may lead to foreign portfolio outflows,” Standard Charted Plc said in a note today.

Government bonds gained. The yield on the 3.125 percent debt due December 2015 fell five basis points, or 0.05 percentage point, to 3.27 percent, according to data compiled by Bloomberg. The one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, added 1.5 basis points to 1.8 percent.

--With assistance from Daniel Ten Kate in Bangkok. Editors: Ven Ram, James Regan

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net