Thai Stocks Drop Most in 19 Months on Bangkok Attack; Baht Falls

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Thai stocks sank the most in 19 months and the baht dropped after an explosion in Bangkok killed at least 20 people and put the nation’s tourism industry at risk.

The benchmark SET Index fell 2.6 percent at the close in Bangkok. A gauge of tourism stocks slumped the most on record, while transport-related companies declined 4.9 percent. The baht weakened 0.5 percent to 35.556 per dollar, approaching its lowest level since April 2009.

Monday’s night-time explosion in Bangkok’s central shopping district was the first major attack in the capital since the military seized power last year. Hospital officials are treating 124 people for injuries, many of whom are foreigners, according to the Emergency Medical Institute of Thailand. Tourism accounts for 10 percent of the nation’s economy, which slowed last quarter amid weak local demand and exports.

The blast will “definitely have a negative impact on equities, the currency and the overall economy,” said Andrew Stotz, chief executive officer of Bangkok-based A. Stotz Investment Research and former head of research for Thailand at CLSA Ltd. “Thailand is vulnerable right now, as economic growth and corporate earnings are weak.”

Erawan Group Pcl, which operates malls and luxury hotels in Bangkok, tumbled 11 percent, its biggest drop since June 2013. Airports of Thailand Pcl, the nation’s biggest airport operator, and Thai Airways International Pcl sank more than 6 percent.

Tourists Killed

The blast during rush hour left body parts scattered on Ratchaprasong intersection, which is surrounded by malls, hotels and the Erawan Hindu shrine frequented by tourists and locals. The dead included Chinese and Filipino visitors. The military government blamed people seeking to destroy the tourist-reliant economy and said security officials have identified suspects behind the attack.

UBS Group AG said that while the event won’t have a long-lasting impact on the economy or investor sentiment, rising non-performing loans and slowing growth make the nation’s stocks unappealing.

“We are underweight in Thailand and see no incentive to revisit the market,” said Adrian Zuercher, the Hong Kong-based head of Asia asset allocation at UBS. “Growth is extremely weak, undershooting expectation by a wide margin, and there is no real sign of improvement. We are in particular concerned about the jump in NPLs.”

The finance ministry in July cut forecasts for exports and gross domestic product growth for a third time this year. A factory output index has dropped every month but one since March 2013, while exports have declined each month this year.

Interest Rates

The baht has fallen 7.5 percent in 2015 as foreigners pulled a net $1.5 billion from the country’s equities amid concerns over the military government’s ability to deliver on pledges to revive economic growth. Prospects of higher U.S. interest rates and slumping commodity prices have also spurred a rout in emerging-market currencies and stocks.

“This tragic news just adds to the poor fundamentals of Thailand,” said Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong. “There were many issues tied to the Thai baht” before this happened, Trinh said, adding that she’s sticking with an underweight call on the currency.

BBL Asset Management Co. said it will buy shares if they fall too much, given the country’s favorable longer-term outlook.

“If prices of stocks in which we have confidence drop so much, we will step in and accumulate them,” said Voravan Tarapoom, Bangkok-based chief executive officer at BBL Asset Management. “The fundamentals of most listed companies remain sound.”

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