Thai stocks fall, baht down on protests

Thailand’s stocks dropped and the baht touched a three-week low on concern protests triggered by a proposed amnesty law for political offences will deepen a slowdown in Southeast Asia’s second-biggest economy.

The SET Index of shares slumped for a third week and the currency headed for a second five-day loss as official data showed global funds pulled $404 million from Thai bonds in the first four days and $166 million from equities.

Prime Minister Yingluck Shinawatra called on Thursday for an end to street demonstrations in Bangkok after agreeing to a demand for scrapping the controversial legislation. The Senate is set to vote on the bill at 2pm. Friday.

“Prolonged political unrest will hurt the economy that’s already weak, and with the current mood foreigners probably don’t want to put money in Thailand,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The political situation will weigh on the baht, which may underperform its regional peers.”

The SET Index plunged 1.4%, the most since Nov 4, to 1,405.45 as of 10.52 am. in Bangkok. The baht lost 0.5% from a week ago and 0.1% today to 31.37 per dollar, according to data compiled by Bloomberg. The currency reached 31.38 earlier, the weakest level since Oct. 17.

One-month implied volatility in the baht, a measure of expected moves in exchange rates used to price options, climbed 22 basis points this week to 5.99 percent. The gauge dropped five basis points, or 0.05 percentage point, today.

‘Additional Headwind’

Should the proposed amnesty law be rejected today by the Senate, it would go back to the lower house for 180 days. Former Prime Minister Abhisit Vejjajiva told a rally on Nov 5 that he will continue to fight until the legislation is scrapped, adding that the blockage by the Senate does not mean the bill is abandoned.

“We will continue to rally even after the senate votes to block the bill,” Suthep Thaugsuban, a Democrat party member of parliament and a leader of the protests against the amnesty bill, said yesterday in a speech that was broadcast by Bluesky television channel. Even after a rejection by the Senate, “the lower house can bring the bill back in about 6 months and passed it again. Prime Minister Yingluck pledged not to bring this bill back. We don’t trust her words anymore.”

Political uncertainty is “another additional headwind” for the Thai economy, Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd, the most accurate baht forecaster over the last four quarters, said in an interview this week. Analysts at the bank predict the local currency will weaken 2 percent to 32 per dollar by year-end.

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Writer: Bloomberg News
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