Baht posts worst month of 2014

The baht posted 2014’s biggest monthly slide and bonds fell as a May 22 military coup prompted global investors to pull about $2 billion from the nation’s debt and stocks.

The currency slumped 1.4% in May to 32.82 per dollar as of 4.03pm in Bangkok, the worst performance in Asia, according to data compiled by Bloomberg. It lost 0.8% this week. The five-year bond yield climbed seven basis points from April 30 to 3.11% and reached a seven-week high of 3.15% on May 27, data compiled by Bloomberg show.

“Foreigners have been selling bonds and stocks as we still don’t know when elections will be held and there remains concern about how the situation will develop,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp in Bangkok. “That weighs on the baht and the baht may maintain a weaker bias for now.”

Global banks from Goldman Sachs Group Inc to Morgan Stanley cut forecasts for Thailand’s economic growth as the political turmoil culminated in the military takeover. Southeast Asia’s second-biggest economy shrank 0.6% in the first quarter as demonstrations hurt production and tourism. Goldman now predicts a 0.5% contraction for the whole year while Morgan Stanley sees zero growth.

Trade numbers

Exports dropped 0.9% last month from a year earlier, compared with a 2.7% decline in March, central bank data showed on Friday. The trade surplus narrowed to $560 million from $3.5 billion. The current account, the broadest measure of trade, slipped into deficit for the first time since October. It swung to a $643-million shortfall, from March’s $2.9-billion excess.

Army chief Prayuth Chan-Ocha seized power on May 22 after seven months of protests, leading to clashes that claimed 28 lives. The military government said returning the country to civilian rule soon is “impossible” because the threat of further violence means it can’t guarantee an election would be free and fair.

The Stock Exchange of Thailand share index proved more resilient, rising 0.2% in May following an 11% gain over the previous three months.

The coup was meant to end the political unrest that led to an annulled election in February and the ouster of Prime Minister Yingluck Shinawatra three months later, according to the army. Instead, protesters have ignored martial law and returned to Bangkok’s streets this week, this time to oppose the military’s takeover and call for the return of civilian rule.

One-month implied volatility in the baht, a measure of expected exchange-rate moves used to price options, fell three basis points this month to 5.53%. The gauge touched a one-month high of 6.81% on May 23.

The cost to insure the nation’s bonds for five years using credit-default swaps fell two basis points in May to 120, CMA prices show. That compares with a six-month average of 135.

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Writer: Bloomberg News
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