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Thai Stocks Erase Protest Losses as Baht Gains on Junta Spending

Thai stocks rose, with the benchmark index erasing losses since anti-government protests that led to a military coup, amid speculation the ruling junta will take steps to boost infrastructure investment and consumer spending.

The SET Index (SET) added 0.9 percent to 1,454.24, the highest close since Oct. 29. That’s two days before protests began in Bangkok against a bill that would have given amnesty to people convicted of crimes linked to political clashes. Turnover rose to 65 billion baht ($2 billion) today, the highest since Sept. 19, data compiled by Bloomberg show. The baht climbed 0.5 percent to 32.69 per dollar, the most since May 14.

October’s demonstration marked the start of an escalation in tensions between opposition politicians and the ruling Pheu Thai party that eventually led to Prime Minister Yingluck Shinawatra’s ouster and spurred the army to take over power in the nation’s 12th coup since 1932. The junta pledged this week to step up investment to help spur economic growth and today relaxed curfew in three main tourist areas that was imposed following the May 22 coup.

“The new government’s indications on accelerating state spending, implementing key economic policies and approving the new fiscal budget has been a very positive sign,” Adithep Vanabriksha, a Bangkok-based money manager at Aberdeen Asset Management Plc, which oversees about $541 billion worldwide, said by phone. “The coup has restored stability and resolved the policy deadlock in the short term.”

Foreign Flows

Overseas investors bought $82 million more Thai equities than they sold yesterday, the first net purchase since May 19. The SET index has climbed 12 percent this year, versus a 1.2 percent gain in the MSCI Asia Pacific Index.

The Thai currency dropped 0.9 percent in the past six days versus the greenback in its longest losing streak of 2014. The 14-day relative-strength index, used by some traders to gauge market swings, reached 70 yesterday, a level that suggests the dollar was poised to reverse its advance.

One-month implied volatility in the baht, a measure of expected exchange-rate swings used to price options, rose five basis points to 5.65 percent, data compiled by Bloomberg show.

“The baht looks to see some buybacks after it’s been sold for some time, while fund inflows to stocks yesterday provided some support as well,” said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities in Tokyo. “The coup wasn’t welcomed by the international society but at least it gets things moving from a complete deadlock.”

Consumer Confidence

Army Chief Prayuth Chan-Ocha seized power after seven months of protests, leading to clashes that claimed 28 lives. It may take at least a year to return Thailand to civilian rule because an interim administration will need time to implement electoral reforms and unify the country, he said in a nationally televised address on May 30.

The junta plans to speed up infrastructure spending such as a dual-track train project that was ruled unconstitutional under the government of Yingluck, who was dismissed as prime minister last month following a court ruling that she abused her powers.

The military will boost investment in projects along the nation’s borders with Malaysia, Myanmar and Laos, Air Chief Marshal Prajin Juntong, its head of economic affairs, told reporters yesterday.

An index of consumer confidence rose to 70.7 in May from 67.8 in April, the first gain in 14 months, the University of the Thai Chamber of Commerce said in statement in Bangkok today.

Thailand’s gross domestic product dropped 0.6 percent last quarter from a year earlier, the first contraction since December 2011, official data showed on May 19.

Southeast Asia’s second-biggest economy may expand between 2 percent and 2.5 percent this year, led by a recovery in local consumption and an acceleration of state spending following the coup, according to a private industry group that includes the Board of Trade, Federation of Thai Industries and Thai Bankers’ Association.

To contact the reporter on this story: Bloomberg News in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Phani Varahabhotla

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