The baht fell more than 1% on Thursday following news that a parliamentary vote to select the country’s next prime minister would be postponed, while other emerging Asian currencies also lost ground as the dollar hit a four-week high.
The baht was down 1.1% after news broke that the next vote for PM could be at least another two weeks away, pending a ruling by the Constitutional Court about the legality of an earlier parliamentary decision.
The currency slipped to around 34.64 to the US dollar in offshore markets despite the decision on Wednesday by the Bank of Thailand to raise its key interest rate by 25 basis points.
Southeast Asia’s second-largest economy has been in political limbo since voters went to the polls 81 days ago, on May 14. Move Forward, the party that won the most votes and seats in the 6-billion-baht election, is now heading for the opposition benches while its erstwhile partner Pheu Thai attempts to form a new administration.
Analysts also noted that the currency trade in Asia was being affected by the decision of Fitch Ratings to downgrade the US government’s top credit rating, a move that angered the White House and surprised investors.
Charu Chanana, a macro and markets strategist at Saxo Markets, said the downgrade by Fitch had made investors more risk-averse, which worked against Asian currencies.
In the equity markets, meanwhile, political uncertainty is expected to further dampen prospects of a revival in initial public offerings (IPOs) this year as foreign investors will continue to shun assets until there is clarity about a new government.
There’s unlikely to be any major IPOs for the rest of this year as companies are concerned about poor demand from international investors, said Manpong Senanarong, a senior executive vice-president at the Stock Exchange of Thailand.
“There is very little hope about any emergence of major IPOs later this year,” Mr Manpong said. “The ongoing political drama has really exhausted overseas investors, who have been the key source of demand for all major IPOs.”
Expectations of a post-election rally on optimism of spending by a new government has faded as the parliamentary standoff continued into its 81st day since voters went to the polls.
While local buying has helped the SET Index erase most losses since the poll, it remains Asia’s worst performing equity gauge this year with a more than 6% drop.
“Large IPOs will probably be delayed to next year if the market sentiment doesn’t get better,” said Win Udomrachtavanich, the chairman of Daol Securities (Thailand). “There will only be small IPOs” that depend solely on Thai investors, he added.
Foreign funds have pulled 51 billion baht from local equities since the May 14 election, bringing net sales for the year to date to 122 billion baht.
Local companies raised about 19 billion baht from IPOs so far this year, versus 64 billion for the same period of 2022, according to data compiled by Bloomberg.
Some 19 companies have listed their stocks this year, with the highest IPO size valued at about 3 billion baht. In 2022, 42 companies sold shares for the first time, with three raising more than 10 billion baht.