Thai Stocks, Baht Advance as Vote Result Buoys Democracy Hopes

  • Referendum victory paves way for elections by late 2017
  • Baht to trade in a range of 34.80 to 35.30 this week: TMB Bank

Thailand’s stocks gained the most in more than five months and the baht strengthened after voters approved a military-backed constitution, putting the nation on track for elections next year.

The SET Index jumped 1.6 percent to 1,542.26 at the close, the highest level since April 2015. The gauge is up 20 percent this year in the best performance in Asia. The baht climbed 0.3 percent to 34.988 a dollar, while Thai government bonds fell, pushing the 10-year yield up five basis points to 2.05 percent.

The passing of the charter means the junta, which has boosted public spending in an attempt to spur economic growth, is more likely to stick to its current timeline of holding elections by late 2017. The document could also boost the military’s influence over future governments and may ultimately mean more political turmoil for Thailand, which has seen 12 coups since the end of absolute rule by kings in 1932.

“A win might be a vote of confidence in the junta and, at a stretch, better policy execution in Thailand,” said Carl Berrisford, an analyst at UBS CIO Wealth Management in Hong Kong. “But it’s really a reiteration of the status quo and the elections target for next year.”

The Election Commission said late Sunday that with 94 percent of votes counted, the draft constitution had received 61.4 percent yes votes to 38.6 percent no votes, though official results aren’t expected for several days. Officials said turnout was around 55 percent of the 50.2 million people eligible to vote, around the same as past such ballots.

Bolster Confidence

Foreign funds have bought a net $2.4 billion of Thai stocks this year and have pumped $9.5 billion into the country’s bonds, exchange data show. The approval of the constitution will bolster investor confidence and help draw more inflows amid optimism that consumption and private investment will rebound, said Kesara Manchusree, president of the Stock Exchange of Thailand.

The baht was the only emerging-market Asian currency to rise on Monday as the greenback strengthened after better-than-expected U.S. jobs data.

“This settles political uncertainty but it’s too soon to tell if this is a genuine move by the junta to release power,” said Wu Mingze, a foreign-exchange trader in Singapore at INTL FCStone Inc., a Nasdaq-listed global payments-service provider.

The baht is likely to trade in a range of 34.80 to 35.30 this week, as the passage of the constitution bolsters investor confidence in Thai assets in the short term, TMB Bank PCL’s Bangkok-based strategist Jitipol Puksamatanan wrote in a note on Monday.

“The result provides relief to investors,” says Tsutomu Soma, Tokyo-based general manager of fixed-income at SBI Securities. “Stability in Thailand is likely to remain, which should encourage inflows to continue for now.”

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