Thai Stocks Drop Most in Asia as Baht Weakens on Political Risk

Thailand’s stocks dropped the most in Asia and the baht fell to the weakest level in a month as a delay in voting on the government’s amnesty bill spurred concerns of more protests against the measure.

The SET Index and the baht extended losses as a proposed Senate vote on the bill scheduled at 2 p.m. today didn’t start. Official data showed global funds pulled $404 million from Thai bonds in the first four days and $166 million from equities. Prime Minister Yingluck Shinawatra called yesterday for an end to street demonstrations in Bangkok after agreeing to demands to scrap the controversial legislation.

“Prolonged political unrest will hurt the economy that’s already weak, and with the current mood foreigners probably don’t want to put money in Thailand,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The political situation will weigh on the baht, which may underperform its regional peers.”

The SET Index slid 1.4 percent to close at 1,405.03. The baht depreciated 0.2 percent, the most this month, to 31.396 per dollar as of 4:40 p.m. in Bangkok. It reached 31.419 earlier, the weakest level since Oct. 10, according to data compiled by Bloomberg. The currency dropped 0.6 percent this week, the most since a five-day period ended Sept. 27.

One-month implied volatility in the baht, a measure of expected moves in exchange rates used to price options, climbed 16 basis points this week to 5.92 percent. The gauge dropped 12 basis points, or 0.12 percentage point, today.

Political Uncertainty

“The delay in senators’ vote for the amnesty bill will hurt investors’ sentiment because it will increase political uncertainty,” Koraphat Vorachet, an investment strategist at Capital Nomura Securities Pcl, said. “Further delay will offer demonstrators reasons to continue their protest.”

Should the proposed amnesty law be rejected today by the Senate, it would go back to the lower house for 180 days. Former Prime Minister Abhisit Vejjajiva told a rally on Nov. 5 that he will continue to fight until the legislation is scrapped, adding that the blockage by the Senate doesn’t mean the bill is abandoned.

“We will continue to rally even after the senate votes to block the bill,” Suthep Thaugsuban, a Democrat party member of parliament and a leader of the protests against the amnesty bill, said yesterday in a speech that was broadcast by Bluesky television channel. Even after a rejection by the Senate, “the lower house can bring the bill back in about six months and pass it again. Prime Minister Yingluck pledged not to bring this bill back. We don’t trust her words anymore.”

Additional Headwind

Political uncertainty is “another additional headwind” for the Thai economy, Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd., the most accurate baht forecaster over the last four quarters, said in an interview this week. Analysts at the bank predict the local currency will weaken 1.9 percent to 32 per dollar by year-end.

Finance Minister Kittiratt Na-Ranong said yesterday the political tension has threatened economic growth because it erodes confidence. The demonstrations could curb gross domestic product gains this year by between 0.1 percentage point and 0.5 percentage point, from the currently estimated 3.5 percent, the University of the Thai Chamber of Commerce said yesterday.

The yield on the 3.625 percent bonds due June 2023 dropped five basis points this week and one basis point today to 3.97 percent, data compiled by Bloomberg show.

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