Thai shares extended their rally yesterday, gaining 2.43% as the landmark bond-buying scheme by the European Central Bank (ECB) spurred investors' risk appetite.
The Stock Exchange of Thailand index was Asia's largest gainer, breaking through the 1,600-point barrier briefly before profit-taking pared some gains to close the market at 1,598.33 points or a 37.99-point gain. Turnover was brisk at 70 billion baht.
Blue-chip bank and energy stocks were at the centre of the buying spree. Bank of Ayudhya (BAY) increased by 29.8% to 90.50 baht, Kasikornbank (KBANK) 3.07% to 235 baht, PTT 2.05% to 348 baht and Bangkok Bank (BBL) 2.93% to 193.50 baht.
However, the baht fell slightly to 32.60/32.62 to the US dollar from 32.58/32.60 on Thursday due mainly to the greenback's strength against major currencies.
Finance Minister Sommai Phasee said the ECB's fresh money printing would come as a boon to Thailand's consumption due to higher liquidity in the financial system.
Quantitative easing (QE) by the ECB and the Bank of Japan (BoJ) will inevitably prompt capital inflows and strengthen the baht, he said.
However, Mr Sommai said managing the currency depended on the Bank of Thailand, as it had many measures for addressing such a flood of inflows.
The ECB will buy €60 billion (2.2 trillion baht) worth of assets each month for 19 months through September 2016 with a combined amount of €1.14 trillion.
The size of the euro zone's bond-buying scheme on an annual basis is comparable with the BoJs ¥80 trillion (22.1 trillion baht).
Ekniti Nitithanprapas, deputy director- general of the Fiscal Policy Office, estimates the ECB's higher-than-expected QE scheme will advance the baht by one or two percentage points from its estimate of 32.50 to the dollar on average this year. The stronger baht will also further blunt the country's export competitiveness.
Research houses recently forecast Thai exports would expand by 2-3% this year, well below the Commerce Ministry's projection of 4%.
Mr Ekniti said other factors to watch were weekend elections in Greece and the US Federal Reserve's move to start normalising its benchmark rate. The euro's pullback could continue if the left-wing Syriza Party wins the Greek election and carries out its pledge to redraft the country's bailout and erase most of its huge debt.
"Fluctuations in the Thai capital market at the moment stem from volatility in global markets," he said, adding that the stuttering economy needed a combination of fiscal and monetary policies.
Bank of Thailand spokesman Chirathep Senivongs Na Ayudhya said the central bank would keep a close watch on foreign exchange and capital movements following the ECB stimulus.
Therdsak Thaveeteeratham of Asia Plus Group Holdings Securities said the surprise ECB move was largely priced in, and the local market could head marginally upwards as investors awaited clues about the Fed's interest rate direction.
Amonthep Chawla, head of research at CIMB Thai Bank, said despite stability in the euro zone without Greece's exit, the euro was projected to depreciate against major currencies following higher liquidity injected through the QE programme.
He recommends investors take an opportunity from the euro's weakness to expand business to the 19-nation euro zone through direct investment, M&As or equities investment.
"Given the weakening euro, imports from Thailand will appear more expensive, hindering Thai exports," Mr Amonthep said.