Thai stocks, currency hold up against instability

Thailand's benchmark stock index and currency are among the best performers in emerging markets as the nation's economic growth outweighs the deadliest political clash in two decades.

The baht's 0.9 percent gain since anti-government rallies began on March 12 makes it the top-performing currency among developing nations, according to data compiled by Bloomberg. The key share index climbed 3 percent, the most among 22 countries on the MSCI Emerging Markets Index after Morocco. It was also the best performer among Asia's 10 biggest equity markets.

Firefighters in Bangkok extinguished blazes over the weekend that burned 39 buildings, following a military assault on May 19 to end the two-month protest in Bangkok. A government report Monday showed Southeast Asia's biggest economy after Indonesia expanded at the fastest pace since 1995 last quarter, driven by exports.

“Fortunately, the manufacturing sector hasn't been much affected by the political turmoil as the factories aren't in central Bangkok,” said Takahide Irimura, head of emerging-market research in Tokyo at Kokusai Asset Management Co., which manages about US$61 billion of assets.

The political conflict may curb consumption and imports, boosting the nation's trade surplus and supporting the baht, Irimura said. Kokusai, whose Global Sovereign Open fund is Asia's biggest bond fund, doesn't provide forecasts, he said.

The baht gained 0.2 percent to 32.38 per dollar as of 12:37 p.m. in Bangkok, according to data compiled by Bloomberg. Exporters are repatriating overseas income to buy baht as “the situation is under control in the capital,” according to Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl. The currency may trade between 32.25 and 32.50 this week, he said.

The cost of credit-default swaps insuring Thai government debt from default declined 3 basis points to 159.4 basis points, according to CMA DataVision prices.

The SET Index dropped 2.4 percent to 747.44 at the lunch break, reflecting the global rout on May 20 and May 21 when the bourse was closed because of violent clashes between demonstrators and security forces. The MSCI Asia-Pacific excluding Japan index slumped 2.8 percent during that time, to an eight-month low, on concern Europe's debt crisis will crimp global growth.

“The Greek debt crisis and domestic political unrest have driven away overseas investors,” said Suppakorn Soontornkit, chief investment officer of MFC Asset Management Pcl, which oversees 230 billion baht (US$7.1 billion) of assets.

Suppakorn maintained his forecast that the SET may rise to between 820 and 887 this year. The company's MFC Value Long Term Equity Fund was ranked the top large equity fund in 2009 by Morningstar Inc., a fund research company.

The eviction of anti-government protesters from central Bangkok will prompt a more prolonged flight from the stocks and currency markets by overseas investors, who expect the demonstrations to resume at some point, Sopawadee Lertmanascha, who manages about 447 billion baht of assets as secretary general of the Government Pension Fund, Thailand's third-biggest money manager, said May 18.

Foreign investors cut their Thai stock holdings on each of this month's 11 trading days, the longest stretch of net sales since November 2008, pulling 38.7 billion baht, according to data compiled by Bloomberg.