Baht Weakens, Bonds Drop as Funds Cut Holdings on Growth Outlook

Thailand’s baht traded 0.4 percent off a nine-month low and government bonds dropped as overseas investors reduced holdings of the nation’s assets amid a worsening global economic outlook.

The World Bank cut its 2013 growth forecast for developing countries to 5.1 percent from a January estimate of 5.5 percent and lowered China to 7.7 percent from 8.4 percent, according to a report yesterday. China is Thailand’s biggest export market after purchasing 12 percent of total shipments in the first four months of the year. International investors sold $1.1 billion more Thai equities than they bought this month and pulled a net $205 million from bonds, official data show.

“The weakening currency discourages foreign investors from the nation’s stocks and bonds,” said Yuji Kameoka, chief foreign-exchange strategist at Daiwa Securities Co. in Tokyo. “The impact from China’s slowdown is quite large on Asia through its exports, while growth concerns are leading to risk-off sentiment.”

The baht declined 0.5 percent to 31.08 per dollar as of 9:22 a.m. in Bangkok, according to data compiled by Bloomberg. It touched 31.19 yesterday, the weakest level since Sept. 7. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed nine basis points to 7.36 percent, a level last seen in December 2011.

Finance Minister Kittiratt Na-Ranong said yesterday that fund outflows from Thailand may be a positive factor, helping to weaken the baht. The currency has dropped 8.1 percent since reaching its strongest level since 1997 in April.

Further weakness in the currency may accelerate foreign sales of Thai equities, Maybank Kim Eng Securities (Thailand) Pcl, the nation’s biggest stock brokerage, said in a research note today. The SET (SET) Index has lost 6.3 percent in the last two days and closed yesterday at its lowest since January.

The yield on 3.625 percent government bonds due June 2023 rose one basis point, or 0.01 percentage point, to 4.02 percent, data compiled by Bloomberg show. That’s the highest level for a benchmark note of that maturity since August 2011.

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

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

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