Thai Baht, Bonds Fall This Week as Bill Sparks Political Concern

Thailand’s baht, government bonds and stocks dropped this week on concern the ruling coalition’s plan to push forward an amnesty bill for political protesters will trigger renewed tension.

The benchmark SET Index (SET) of shares fell by the most in six weeks yesterday and slumped 1.8 percent from July 19 after the leader of Prime Minister Yingluck Shinawatra’s Pheu Thai Party said late July 24 that a bill to pardon all wrongdoings in past political demonstrations will be tabled in August, according to the party’s website. Exports fell 3.4 percent in June from a year earlier, following a 5.3 percent decline in May, official data showed today, amid concern an economic slowdown in China will hurt overseas sales.

“While sentiment is not so strong, any concern with regard to the political situation hurts the baht and Thai assets,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “China slowdown concern is lingering and from the export perspective, it’s negative for the region.”

The baht fell 0.2 percent this week to 31.1 per dollar as of 3:33 p.m. in Bangkok and touched a one-week low of 31.17 earlier, according to data compiled by Bloomberg. It was unchanged today after declining 0.5 percent yesterday. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 34 basis points this week to 6.38 percent.

New Bill

The proposed bill would pardon those involved in demonstrations, mainly supporters of the current government, after former Prime Minister Thaksin Shinawatra was toppled in a 2006 coup. Thaksin is Yingluck’s brother. The bill is negative for stocks and could lead to another round of demonstrations, according to a DBS Vickers research note released yesterday.

The drop in exports compared with the median estimate in a Bloomberg survey for a 1.6 percent increase.

A Purchasing Managers Index from HSBC Holdings Plc and Markit Economics this week showed a preliminary reading for Chinese factory output of 47.7 in July, compared with a forecast for 48.2. China took 11 percent of Thai exports in the first half of 2013 and shipments to Asia’s largest economy slumped 17 percent in June, official data show.

The yield on the 3.625 percent bonds due June 2023 increased 15 basis points, or 0.15 percentage point, this week to 3.87 percent, according to data compiled by Bloomberg. The rate, which was steady today, was the highest since June 26.

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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