Thai Stocks, Baht Rise to Two-Year High on Fund Inflows, Economic Growth

Thailand’s stocks rose to the highest level since May 2008 and the baht completed its best week in more than four months after the government raised its economic growth outlook for the year.

The currency also climbed to its strongest since May 2008 after Finance Minister Korn Chatikavanij said on Aug. 4 that the economy will expand the most since 1995. Overseas investors poured $377 million into Thai equities in the nine days ended yesterday, helping boost the benchmark SET Index for 12 straight days, the longest winning streak in more than two decades.

“The growth forecast was quite impressive, and there is more room for stocks to rise,” said Paisarn Lertkowit, a currency trader at Bangkok Bank Pcl, the country’s biggest. “When you compare this with other regions, only Asia has a pretty impressive growth outlook. That’s why we may see further capital inflows.”

The baht gained 0.7 percent this week, its best performance since the week ended March 19, to 32.07 per dollar as of 4:43 p.m. in Bangkok, according to data compiled by Bloomberg. It rose 0.2 percent from yesterday and touched 32.04, the strongest level since May 2008.

The SET Index added 0.02 percent today to close at 875.07, taking this week’s appreciation to 2.3 percent, the most since the five days ended July 9. The index rose for an eighth straight week.

Bull Market

The measure has climbed more than 20 percent since its May 25 low, an increase that analysts define as a bull market. Thai stocks have rebounded after sliding 10 percent in April and May, when clashes between troops and anti-government protesters in Bangkok led to at least 89 deaths.

“The foreign flow continues to come in as long as the baht stabilizes or strengthens,” said Andy Pornprinya, Bangkok-based senior vice president for regional institutional sales at UOB Kay Hian Securities (Thailand) Pcl. “The biggest risk for foreign investors is the currency. With strong economic fundamentals and a strong baht, that’s why Thai stocks continue to do very well.”

Thailand’s economy, Southeast Asia’s second biggest after Indonesia, may grow as much as 8 percent in 2010, more than a June estimate of a maximum 6 percent, Korn said.

The Bank of Thailand on July 14 raised its benchmark interest rate for the first time in almost two years, boosting the one-day bond repurchase rate by a quarter of a percentage point to 1.5 percent.

‘Cyclical Recovery’

“We are positive on Thai equities where there are opportunities to ride the cyclical recovery,” said Julian Tarrobago, who helps oversee about $120 million of assets at ATR KimEng Asset Management Inc. in Manila.

The one-year onshore swap rate, the fixed cost needed to receive a floating payment, rose to 1.77 percent from 1.75 percent a week ago. The rate has increased 39 basis points since the end of June, suggesting investors have stepped up bets for interest-rate increases. A basis point is 0.01 percentage point.

Central bank Deputy Governor Bandid Nijathaworn said on July 20 that the rate increase “won’t be a one-time event” and will continue if economic conditions remain strong.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

Enlarge image

Korn Chatikavanij, Thailand's finance minister

Tomohiro Ohsumi/Bloomberg

The currency also climbed to its strongest since May 2008 after Finance Minister Korn Chatikavanij said on Aug. 4 that the economy will expand the most since 1995.

The currency also climbed to its strongest since May 2008 after Finance Minister Korn Chatikavanij said on Aug. 4 that the economy will expand the most since 1995. Photographer: Tomohiro Ohsumi/Bloomberg