Baht Rally Stalls on China, Japan Slowdown Concern; Bonds Rise

Thailand’s baht stalled following its best quarter in two years after official reports today signaled an economic slowdown is deepening in China and Japan, the nation’s biggest export markets. Bonds gained.

Chinese factory output contracted for a second month in September and trailed economists’ forecasts, while sentiment among large Japanese manufacturers worsened with pessimists outnumbering optimists last quarter, the Bank of Japan (8301) said. Thai overseas sales shrank for a third month in August and a slump in industrial production deepened, government reports showed last month.

“The global economy remains in a fragile state and exports will remain weak for a while,” said Tanawat Ruenbanterng, an economist at Tisco Securities Co. in Bangkok. “We will have to wait for next year to see some improvement,” given that global stimulus measures will take time to have an impact, he said.

The baht traded at 30.80 per dollar as of 3:50 p.m. in Bangkok, unchanged from Sept. 28, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange- rate swings used to price options, was little changed at 4.27 percent.

The currency rallied 3.1 percent last quarter, the most in two years, after central banks in Europe, the U.S. and Japan announced plans to inject money into their economies by buying more bonds.

Accelerating Inflation

China’s Purchasing Managers’ Index was at 49.8 in September after a reading of 49.2 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. A level below 50 implies a contraction. The Tankan index for large manufacturers fell in the July through September quarter to minus 3 from minus 1, the fourth negative reading, the Bank of Japan said.

Ten-year notes gained for a fifth day. The Commerce Ministry cut its 2012 inflation forecast to between 3 percent and 3.4 percent, versus a previous range of 3.3 percent to 3.8 percent, citing a cap on fuel prices.

Consumer prices rose 3.38 percent in September from a year earlier, compared with a 2.69 percent gain in August, the Commerce Ministry said in Bangkok today. Economists forecast a 3.29 percent rise, according to the median forecast in a Bloomberg News survey.

The yield on the government’s 3.65 percent bonds due December 2021 dropped one basis point, or 0.01 percentage point, to a three-week low of 3.51 percent, according to data compiled by Bloomberg. The yield fell 17 basis points since Sept. 24.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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