Thailand’s baht rose by the most since February 2008 and shares climbed after an election victory by allies of exiled former premierThaksin Shinawatra raised prospects foreign investors will return to the nation.
The cost of protecting government bonds from default dropped the most in more than a year as Pheu Thai, led by Thaksin’s sister Yingluck Shinawatra, won 265 seats in the 500- member parliament and announced the formation of a five-party, 299-seat coalition. Prime Minister Abhisit Vejjajiva congratulated Yingluck, and the defense minister said the army accepted the result. The benchmark SET Index of shares advanced by the most since April 2010.
Investors have sold Thai stocks and the baht over the past month amid concern a disputed result would spark violence. The decisive win by Thaksin’s allies may bring stability to a nation beset by clashes between his supporters and opponents that claimed more than 100 lives since the last vote in 2007.
“The majority victory is a very welcome outcome and foreign investors will come back very quickly,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “It cleared a part of the uncertainty and sentiment will stabilize.”
The baht climbed 1 percent, the most since Feb. 29, 2008, to 30.49 per dollar as of 4:45 p.m. in Bangkok, according to data compiled by Bloomberg. The currency reached 30.41 earlier, the strongest level since June 23. Credit Agricole expects the baht to rise to 29.20 by year-end, Cheung said.
Pre-Election SlideThe SET Index added 4.7 percent, the biggest advance in Asia today, to 1,090.28 as SC Asset Corp. and M Link Asia Corp., companies controlled by Yingluck’s family, surged. SC Asset jumped 12 percent to 15.4 baht and M Link climbed 25 percent to 2.22 baht.
Global funds sold $884 million more Thai equities than they bought in June, the biggest monthly sell-off since January, according to stock exchange data. The benchmark SET Index fell to a three-month low on June 27. Overseas investors bought a net 10.7 billion baht ($351 million) of Thai stocks today, the most since Dec. 8, according to Bloomberg data.
Credit-default swaps on Thailand fell 11 basis points, or 0.11 percentage point, to 119.5 basis points, according to Royal Bank of Scotland Group Plc. That’s the biggest drop since May 27 last year, according to prices from CMA.
“Pheu Thai’s majority victory is positive for the economy,” said Vana Bulbon, chief executive officer at UOB Asset Management (Thailand) Co., which oversees the equivalent of $1.8 billion of assets. “It will let them control key economic ministries, allowing better coordination and implementation of policies. Politics has been the key risk discouraging overseas investors.”
Political StabilityThe SET Index trades for 12.1 times estimated 2011 earnings, compared with 13.8 times for the MSCI Asia Pacific Index. The Thai index dropped 3 percent in June, while the baht fell 1.4 percent against the dollar, the worst performance among its Asian peers.
“The stability of the new government is very important for both local and foreign investors,” said Voravan Taraphum, chief executive officer at BBL Asset Management Co., a unit of Thailand’s biggest lender, which oversees about $4.9 billion of assets. “The return of overseas investment into Thai stocks will help the baht appreciate.”
A military crackdown on protests by Thaksin’s supporters last May sparked violent clashes, claiming about 90 lives. The supporters occupied Bangkok’s commercial district, forcing a closure of some shopping malls and offices. In 2008, a seizure of Bangkok’s airports during a protest by Thaksin’s opponents disrupted trade and stranded thousands of tourists.
Investor CautionSome investors may be cautious about buying Thai assets on concern Pheu Thai’s victory won’t bring an end to political instability, said Takahide Irimura, head of emerging-market research at Tokyo-based Kokusai Asset Management Co.
“Investors are worried there will be a repetition of protests, violence or other kinds of political problems that may hinder the nation’s economy or financial markets,” said Irimura, whose company oversees about $57 billion of assets including Asia’s biggest debt fund.
Thaksin was ousted in a 2006 coup and has lived overseas since fleeing a jail sentence for abuse of power in 2008. Abhisit told his supporters that Pheu Thai plans an amnesty for Thaksin, allowing him to return to the Southeast Asian country and reclaim more than $1 billion in seized wealth.
Winning CandidatesThaksin said today in Dubai he has no immediate plans to return to his homeland and downplayed concerns he would leverage his sister’s election win to regain the seized wealth.
The Election Commission will certify winning candidates within 30 days, after which parliament will meet to pick a prime minister, according to spokesman Paiboon Lekprom. Pheu Thai won 265 seats, the Democrats 159 seats and smaller parties 76 seats based on the latest unofficial Election Commission data, Paiboon said today.
Thaksin-backed parties have won as much as 49 percent of seats in four previous elections dating back to 2001, only to see the last three results overturned through court rulings and a coup.
“If the Pheu Thai party is allowed to govern with the majority it has won in free and fair elections, that’s progress for Thailand,” said Michael Montesano, visiting research fellow at the Institute of Southeast Asia Studies in Singapore. “There are many steps ahead and the country is bitterly divided.”
Pheu Thai pledged to provide guaranteed prices for farmers, increase minimum wages, maintain policies to encourage foreign direct investment and take measures to curb consumer prices. Inflation held at 4.06 percent in June, near a 32-month high, government data show.
Higher Interest Rates
The Bank of Thailand has raised the benchmark one-day bond repurchase rate four times this year to 3 percent. The finance ministry said last week it expects gross domestic product to increase by a maximum of 5 percent this year.
Even after the worst political violence in almost two decades, both the SET Index and the currency were the second- best performers in Asia excluding Japan last year, with a 41 percent gain and 11 percent appreciation, respectively. The index fell 0.6 percent in the second quarter, the gauge’s first quarterly loss since March 2009, while the baht posted its second quarterly decline, losing 1.6 percent.
“I don’t expect overseas investors will react negatively in the short term because they already factored this in by selling Thai equities in the past month,” said Jitra Amornthum, head of research at Finansia Syrus Securities Pcl in Bangkok. “The election delivers a clear picture that Pheu Thai will head the new government with a strong mandate.”
The cost of protecting government bonds from default dropped the most in more than a year as Pheu Thai, led by Thaksin’s sister Yingluck Shinawatra, won 265 seats in the 500- member parliament and announced the formation of a five-party, 299-seat coalition. Prime Minister Abhisit Vejjajiva congratulated Yingluck, and the defense minister said the army accepted the result. The benchmark SET Index of shares advanced by the most since April 2010.
Investors have sold Thai stocks and the baht over the past month amid concern a disputed result would spark violence. The decisive win by Thaksin’s allies may bring stability to a nation beset by clashes between his supporters and opponents that claimed more than 100 lives since the last vote in 2007.
“The majority victory is a very welcome outcome and foreign investors will come back very quickly,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “It cleared a part of the uncertainty and sentiment will stabilize.”
The baht climbed 1 percent, the most since Feb. 29, 2008, to 30.49 per dollar as of 4:45 p.m. in Bangkok, according to data compiled by Bloomberg. The currency reached 30.41 earlier, the strongest level since June 23. Credit Agricole expects the baht to rise to 29.20 by year-end, Cheung said.
Pre-Election SlideThe SET Index added 4.7 percent, the biggest advance in Asia today, to 1,090.28 as SC Asset Corp. and M Link Asia Corp., companies controlled by Yingluck’s family, surged. SC Asset jumped 12 percent to 15.4 baht and M Link climbed 25 percent to 2.22 baht.
Global funds sold $884 million more Thai equities than they bought in June, the biggest monthly sell-off since January, according to stock exchange data. The benchmark SET Index fell to a three-month low on June 27. Overseas investors bought a net 10.7 billion baht ($351 million) of Thai stocks today, the most since Dec. 8, according to Bloomberg data.
Credit-default swaps on Thailand fell 11 basis points, or 0.11 percentage point, to 119.5 basis points, according to Royal Bank of Scotland Group Plc. That’s the biggest drop since May 27 last year, according to prices from CMA.
“Pheu Thai’s majority victory is positive for the economy,” said Vana Bulbon, chief executive officer at UOB Asset Management (Thailand) Co., which oversees the equivalent of $1.8 billion of assets. “It will let them control key economic ministries, allowing better coordination and implementation of policies. Politics has been the key risk discouraging overseas investors.”
Political StabilityThe SET Index trades for 12.1 times estimated 2011 earnings, compared with 13.8 times for the MSCI Asia Pacific Index. The Thai index dropped 3 percent in June, while the baht fell 1.4 percent against the dollar, the worst performance among its Asian peers.
A military crackdown on protests by Thaksin’s supporters last May sparked violent clashes, claiming about 90 lives. The supporters occupied Bangkok’s commercial district, forcing a closure of some shopping malls and offices. In 2008, a seizure of Bangkok’s airports during a protest by Thaksin’s opponents disrupted trade and stranded thousands of tourists.
Investor CautionSome investors may be cautious about buying Thai assets on concern Pheu Thai’s victory won’t bring an end to political instability, said Takahide Irimura, head of emerging-market research at Tokyo-based Kokusai Asset Management Co.
“Investors are worried there will be a repetition of protests, violence or other kinds of political problems that may hinder the nation’s economy or financial markets,” said Irimura, whose company oversees about $57 billion of assets including Asia’s biggest debt fund.
Thaksin was ousted in a 2006 coup and has lived overseas since fleeing a jail sentence for abuse of power in 2008. Abhisit told his supporters that Pheu Thai plans an amnesty for Thaksin, allowing him to return to the Southeast Asian country and reclaim more than $1 billion in seized wealth.
Winning CandidatesThaksin said today in Dubai he has no immediate plans to return to his homeland and downplayed concerns he would leverage his sister’s election win to regain the seized wealth.
The Election Commission will certify winning candidates within 30 days, after which parliament will meet to pick a prime minister, according to spokesman Paiboon Lekprom. Pheu Thai won 265 seats, the Democrats 159 seats and smaller parties 76 seats based on the latest unofficial Election Commission data, Paiboon said today.
Thaksin-backed parties have won as much as 49 percent of seats in four previous elections dating back to 2001, only to see the last three results overturned through court rulings and a coup.
“If the Pheu Thai party is allowed to govern with the majority it has won in free and fair elections, that’s progress for Thailand,” said Michael Montesano, visiting research fellow at the Institute of Southeast Asia Studies in Singapore. “There are many steps ahead and the country is bitterly divided.”
Pheu Thai pledged to provide guaranteed prices for farmers, increase minimum wages, maintain policies to encourage foreign direct investment and take measures to curb consumer prices. Inflation held at 4.06 percent in June, near a 32-month high, government data show.
Higher Interest Rates
The Bank of Thailand has raised the benchmark one-day bond repurchase rate four times this year to 3 percent. The finance ministry said last week it expects gross domestic product to increase by a maximum of 5 percent this year.
Even after the worst political violence in almost two decades, both the SET Index and the currency were the second- best performers in Asia excluding Japan last year, with a 41 percent gain and 11 percent appreciation, respectively. The index fell 0.6 percent in the second quarter, the gauge’s first quarterly loss since March 2009, while the baht posted its second quarterly decline, losing 1.6 percent.
“I don’t expect overseas investors will react negatively in the short term because they already factored this in by selling Thai equities in the past month,” said Jitra Amornthum, head of research at Finansia Syrus Securities Pcl in Bangkok. “The election delivers a clear picture that Pheu Thai will head the new government with a strong mandate.”
