Investors have sold Thai bonds for three consecutive days, tallying nearly 30 billion baht, based on concerns about Thailand's political instability, according to the Thai Bond Market Association (ThaiBMA).
Ariya Tiranaprakit, executive vice-president of the ThaiBMA, said the sell-off valued at almost 30 billion baht means the baht will likely weaken from 34.9 to the dollar. Given the political instability, foreign investors may delay investing in the Thai market until the next government is formed and economic policies are announced.
The stock market fell for a second consecutive day after the Constitutional Court on Wednesday disqualified Srettha Thavisin as prime minister for an ethics violation.
Ms Ariya said foreign investors began selling Thai bonds on Aug 13, valued at more than 6.7 billion baht.
"There were signs the baht was starting to weaken, and investors had accumulated more than 22 billion baht worth of bonds since the baht began to appreciate in July, with the dollar weakening based on economic data in the US," she said.
Once foreign investors reached a certain level of profit and the baht was likely to weaken, foreign investors began selling to earn profits, said Ms Ariya.
Following the court's ruling on Aug 14, sales of Thai bonds intensified, amounting to almost 10 billion baht. Yesterday the rout continued in the morning, with another 9.1 billion baht worth of sales.
"If domestic politics are still unstable, foreign investors will probably wait until the situation becomes clearer. During this period, the baht may weaken and fluctuate against the dollar," she said.
Thai investors are still interested in large corporate bonds with high credit ratings or investment-grade bonds, said Ms Ariya.
Poon Panichpibool, a global market strategist at Krungthai Bank, said the baht opened yesterday morning at 35.08 per dollar, depreciating from the previous day's close of 34.92. The baht has been volatile since Wednesday, breaking through 35 per dollar after the greenback strengthened once the market learned US inflation eased to 2.9% in July, lower than expected.