Baht Near Nine-Month Low as Funds Cut Holdings on Growth Outlook

Thailand’s baht traded 0.8 percent off a nine-month low and 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 was little changed at 30.92 per dollar as of 3:17 p.m. in Bangkok, compared with 30.94 yesterday, data compiled by Bloomberg show. It weakened as much as 0.6 percent earlier to 31.11 and touched 31.19 yesterday, the lowest since Sept. 7.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 13 basis points to 7.14 percent.

Baht Intervention

The Bank of Thailand is taking measures to smooth volatility in the baht, and sold “a certain amount of dollars” in the past week, Governor Prasarn Trairatvorakul told reporters in Bangkok today. The currency has dropped 7.7 percent since reaching its strongest level since 1997 in April.

“Weaker currencies worsen sentiment for the region as most investors rush to withdraw investments in bonds and equities,” Chakrit Puechpan, the head of domestic equities at MFC Asset Management Pcl, which oversees about $11 billion of assets, said by phone from Bangkok.

The yield on 3.125 percent government bonds due December 2015 rose two basis points, or 0.02 percentage point, to a three-month high of 2.88 percent, data compiled by Bloomberg show.

Stocks markets across Asia fell after the World Bank cut growth estimates. Thailand’s SET index of shares dropped as much as 5.7 percent and was last down 3.8 percent.

Before it's here, it's on the Bloomberg Terminal.