Thai Stocks, Baht Drop From Three-Week Highs on Protest Blast

Thailand’s benchmark stock index and the baht retreated from three-week highs after an explosion at an anti-government protest injured 31 in Bangkok.

A device that may have been a home-made bomb was thrown from an empty house close to where protesters were marching in the capital, according to the Bluesky television network, which is affiliated with the opposition Democrat party. The SET Index of domestic shares and the baht were still up for the week, having advanced as demonstrations lost momentum in Bangkok.

“There is no reason to buy the baht or Thai assets while the protests continue,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Bank Ltd. in Tokyo. “The longer the unrest lasts, the more foreign investors will be reluctant to buy Thai assets.”

The SET Index dropped 0.5 percent to 1,295.41 in Bangkok, having yesterday recorded its highest close since Dec. 26. The gauge climbed 3.2 percent this week. The baht fell 0.2 percent to 32.86 per dollar, according to data compiled by Bloomberg. It strengthened 0.5 percent this week, the most since October, and touched 32.655 today, the strongest level since Dec. 24.

The currency rose this week as the number of people manning roadblocks at Victory Monument and Asoke, two of seven protest sites in the capital, fell below a hundred at times yesterday, down from more than a thousand when the demonstrations began at the start of the week.

Rate Outlook

“The risk premium for the baht has come down,” said Pareena Phuangsiri, an analyst at Kasikornbank Pcl in Bangkok. “It’s not really a shutdown as people are still able to come to work, and now more cars are on the street. However, there still is the political uncertainty which will cap gains.”

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, declined three basis points today and six basis points from Jan. 10 to 7.19 percent.

The government’s two-year bonds advanced this week amid speculation the central bank will lower borrowing costs at a Jan. 22 policy meeting to support growth. The Bank of Thailand will cut its benchmark interest rate by a quarter of a percentage point to 2 percent, according to nine of 12 economists surveyed by Bloomberg. Three forecast no change.

The finance ministry lowered its 2014 economic growth forecast yesterday for the second time in a month, cutting its estimate to 3.1 percent after a Dec. 26 reduction to 4 percent from 5.1 percent. Thailand has seen more than two months of anti-government protests aimed at eroding the influence of Prime Minister Yingluck Shinawatra and that of her brother Thaksin, who was ousted as premier in a 2006 coup.

Bonds Gain

Protest leader Suthep Thaugsuban, a former member of the opposition Democrat Party, has said demonstrations will continue until Yingluck steps aside and an unelected council is installed in her place.

The yield on the government’s 3.125 percent debt due December 2015 dropped six basis points from a week ago to 2.42 percent, data compiled by Bloomberg show. The rate, the most sensitive to the policy outlook, was little changed today. One basis point is 0.01 percentage point.

“The front end is pricing in market expectations of a rate cut next week as there is concern the protests are hurting growth,” Kasikornbank’s Pareena said.

The central bank surprised the market on Nov. 27 by trimming its benchmark rate to 2.25 percent from 2.5 percent. All 19 economists in a Bloomberg survey predicted the rate would be left unchanged.

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