Thai Five-Year Bonds, Stocks Rally in Week as Inflows Increase

Thailand’s five-year bonds had the biggest weekly gain since November as easing political tensions drew more overseas investors to the nation’s assets.

The yield on the 3.875 percent government notes due June 2019 dropped 12 basis points from July 11 to 3.06 percent as of 3:33 p.m. in Bangkok, according to data compiled by Bloomberg. That’s the lowest level since May 23.

Global funds plowed a net $1.3 billion into Thai stocks and bonds this week as the junta accelerates state spending to revive the economy. On July 15, the National Council for Peace and Order, a group of military leaders, approved a new budget starting Oct. 1 with a 2 percent increase in investment in projects including train networks and water management.

“Overseas investors have bought back bonds and stocks to cover short positions,” said Usara Wilaipich, a Bangkok-based economist at Standard Chartered Plc in Bangkok. “A better economic outlook and political situation have increased foreign investors’ demand for those securities.” A short position is a bet that an asset will decline.

The baht was little changed today and for the week at 32.15 per dollar, according to data compiled by Bloomberg. The currency advanced 0.9 percent in July, the best performance among 24 emerging-market currencies tracked by Bloomberg after Indonesia’s rupiah. Goldman Sachs Group Inc. raised its three-month forecast for the baht to 32 per dollar from 34, according to a research note dated July 15.

One-month implied volatility, a gauge of expected exchange-rate swings used to price options, climbed one basis point to 4.45 percent today, data compiled by Bloomberg show. It fell five basis points, or 0.05 percentage point, for the week.

The SET Index of the nation’s shares climbed for a fifth week, rising 1.1 percent to 1,533.88. It closed at a 13-month high of 1,535.66 yesterday.

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