The Thai baht sank to the weakest level since September 2009 and shares erased this year’s gains as global funds sold the nation’s assets amid concern growth will weaken in Southeast Asia’s second-largest economy.
The benchmark SET Index dropped 1 percent to 1,485.72, the lowest close since Jan. 6. The gauge has declined 0.8 percent this year. The baht fell 0.3 percent to 33.805 per dollar, extending its loss in the past month to 3.7 percent, Asia’s worst-performing currency during the period.
Overseas investors have sold a net $112.2 million of Thai shares and withdrawn $786 million from local notes since the Bank of Thailand unexpectedly lowered benchmark interest rates on April 29. The Finance Ministry cut its economic growth forecast for this year to 3.7 percent from 3.9 percent on the same day, citing a slump in exports and domestic consumption.
“Thai economic fundamentals are much weaker than neighboring countries,” Poramet Tongbua, an investment strategist at Bualuang Securities Pcl, said by phone from Bangkok. “The baht’s weakness is also causing concern among some foreign investors” as it reduces the value of their investments in dollar terms, he said.
A Bloomberg gauge of dollar strength climbed 0.4 percent Monday as investors bet the Federal Reserve remains on track to raise interest rates this year while global peers retain unprecedented easing.
Thailand’s central bank last month cut its one-day bond repurchase rate for a second straight meeting, reducing it by a quarter of a percentage point to 1.5 percent. Only two economists surveyed by Bloomberg predicted the decision, while 18 forecast no change.
“Some foreign investors are probably reducing their positions on Thai bonds on concern about the baht’s quick decline,” Kobsidthi Silpachai, head of capital markets research at Kasikornbank Pcl, said by phone from Bangkok. “The central bank’s interest-rate cut and the dollar’s strong outlook have also added to the baht’s weakness.”
PTT Pcl slid 2.5 percent, the biggest drag on the benchmark stock index on Tuesday. Siam Cement Pcl dropped 2.2 percent, Bangkok Bank declined 1.1 percent and Kasikornbank Pcl fell 1.4 percent.
The MAI Index, a gauge of small-cap companies, sank 2.5 percent, taking its decline from this year’s peak to 21 percent and meeting the common definition of a bear market.
“Most investors prefer to stay on the sidelines at the time of share-price declines,” Prapan Charoenprawatt, the president of Market for Alternative Investment, or so-called MAI market, said by phone from Bangkok. “The lower trading volume has added to the weak sentiment in the MAI market.”
Ten-year sovereign bonds fell for the first time in three days, pushing the yield up 14 basis points, or 0.14 percentage point, to 2.92 percent. The one-year interest-rate swap declined three basis points to 1.435 percent.