Bloomberg News

Thai Baht, Bonds Decline After Global Funds Cut Asset Holdings

June 03, 2013

Thailand’s baht fell to the weakest level since January and government bonds dropped after overseas investors trimmed holdings of the nation’s assets on concern policy makers will impose measures to stem inflows.

Global funds turned net sellers of the nation’s debt in May for the first time since September 2011 as central bank Assistant Governor Paiboon Kittisrikangwan said last week measures have been prepared to combat baht volatility. The Finance Ministry plans to reduce its 5.3 percent economic growth forecast for 2013 this month, Ekniti Nitithanprapas, a ministry spokesman, said May 30.

“There’s lingering concern about the capital controls in Thailand, which has been weighing on the baht,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “There’s also some indication of slowing growth, which discourages investors.”

The baht dropped 0.2 percent to 30.41 per dollar as of 3:14 p.m. in Bangkok, trimming this year’s gain to 0.6 percent, according to data compiled by Bloomberg. The currency touched 30.50 earlier, the weakest level since Jan. 4. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, to 6.62 percent.

Sell Baht

International investors sold $930 million more government debt than they bought in May after pumping a net $12 billion into the securities in the first four months of this year, Thai Bond Market Association figures show. They sold a net $477 million of local equities last week, according to exchange data.

The Bank of Thailand lowered the one-day bond repurchase rate by a quarter of a percentage point to 2.5 percent on May 29, the first cut since October, and said it is ready to act on monetary policy if needed.

Finance Minister Kittiratt Na-Ranong said May 29 that an amended regulation enables the central bank to set conditions or collect fees on funds flowing in or out of the country. The monetary authority will refrain from using the measures if they aren’t necessary, Assistant Governor Paiboon said.

“I don’t see any reason that the government should impose any capital controls” given that the central bank reduced borrowing costs last week and the baht has declined, Chularat Suteethorn, director general of the finance ministry’s Public Debt Management Office, said on May 31.

Societe Generale SA recommends clients sell the baht against the dollar on the risk of capital controls, a shift in the Bank of Thailand’s monetary-policy stance to dovish from neutral and the outflows, according to a May 31 research note written by Wee-Khoon Chong, a strategist in Hong Kong. The target is a decline to 31 with a stop loss at 29.83.

The yield on the 3.625 percent bonds due June 2023 climbed five basis points to 3.56 percent, the highest since March 21, data compiled by Bloomberg show.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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