The Thai baht posted its biggest two-month gain since October as overseas investors increased purchases of the nation’s assets on optimism the military government will revive economic growth.
The junta, which took control in a May 22 coup, approved an infrastructure investment plan on Tuesday that will include the construction of new railways, mass transit systems in Bangkok and nationwide highways. The economy, which shrank in the first quarter, may expand 5% in 2015 from about 2% this year on higher spending and a rebound in exports and tourism, the Finance Ministry said on Wednesday.
The currency appreciated 1% in July to 32.128 per dollar as of 4.30pm, adding to June’s 1.2% gain, according to data compiled by Bloomberg. It reached an eight-month high of 31.74 on July 23. Global funds bought a net $5.05 billion of local debt this month through Wednesday, the biggest inflow since February 2012, Thai Bond Market Association data show.
“There is room for more foreign fund inflows because Thailand’s economic outlook has turned more upbeat,” said Pongtharin Sapayanon, a fixed-income fund manager at Aberdeen Asset Management. “Foreigners have raised their positions in Thai financial assets after selling them off during the political deadlock.”
The SET Index of Thai shares rose 1.1% in July for a sixth straight month of gains as overseas investors pumped a net $460 million into the nation’s equities through July 30, halting two months of outflows. It dropped 1% on Thursday.
In the local bond market, 10-year notes posted the first monthly gain in three. The yield on sovereign debt due in April 2024 fell 19 basis points, or 0.19 percentage point, to 3.74%, according to data compiled by Bloomberg. It reached a two-month low of 3.68% on July 22.
"ING Groep NV predicts the yield will drop to 3.4% by year-end," Singapore-based economist Prakash Sakpal wrote in a research note on Wednesday.