Foreign investors have returned to Thailand's bond and equity markets, with net inflows into the bond market surpassing 40 billion baht in May and nearly 100 billion baht year-to-date, according to the Thai Bond Market Association (ThaiBMA).
The Thai stock market is also recording renewed interest, with net foreign buying reported last week, pushing the Stock Exchange of Thailand (SET) index to surpass 1,200 points and lifting trading volumes significantly.
Ariya Tiranaprakij, executive vice-president of ThaiBMA, said the inflows into bonds reflect short-term investments aimed at arbitrage between the baht and the dollar.
Investors are also speculating on potential interest rate cuts by the Bank of Thailand, following persistently low inflation, which remains below the central bank's target. Despite ongoing volatility driven by the unresolved US-China trade war, there is still room for further capital inflows into the Thai market in the near term, she said.
In addition to expectations of further rate cuts, the baht remains stable with potential short-term appreciation. Some foreign investors have entered the market to speculate on exchange rate gains, anticipating that the baht may strengthen in the short run as capital flows into Thailand.
"This comes amid growing expectations that the Federal Reserve will begin cutting interest rates in the second half of 2025, which has contributed to a weaker dollar," said Ms Ariya.
Moreover, she said investors see Thai bonds as low-risk and highly liquid, particularly government bonds which are rated investment grade. Foreign investors can easily buy and sell these instruments, and have access to various hedging tools to manage foreign exchange risk.
"Amid ongoing global uncertainties such as trade tensions, conflicts in the Middle East, and a slowing Chinese economy, investors are increasingly turning to safe-haven assets like bonds. Thailand is considered a stable emerging market, making it an attractive destination for foreign capital seeking diversification," said Ms Ariya.
Thai bonds also offer compelling returns, even as policy rates trend downward, she said. The yield on Thai bonds remains attractive on a risk-adjusted basis, particularly those with medium-to-long-term maturities. Several Thai corporate bonds are offering coupon rates of as high as 5–7% annually, further boosting investor interest, said Ms Ariya.
Asia Plus Securities (ASPS) said the Thai equity market, like other Asian markets, is showing signs of recovery, supported by the resumption of US-China trade negotiations. The nearly 5% rise in oil prices also provides a significant tailwind for the Thai bourse, where roughly a third of listed companies are linked to energy prices.
ASPS recommends three key investment themes should trade tensions ease. Those are energy plays, earnings growth, and value picks (fundamentally strong stocks that have seen deep corrections).
According to the brokerage, the most heavily accumulated stocks by foreign investors include Charoen Pokphand Foods (CPF), TISCO Financial Group (TISCO), Srisawad Corporation (SAWAD), Krung Thai Bank (KTB), Bumrungrad Hospital (BH), PTT, OSP, TOP, Banpu (BANPU), Amata Corporation (AMATA), Bangkok Dusit Medical Services (BDMS), Bangkok Bank (BBL), Thanachart Capital (TCAP), Siam Cement (SCC), and Erawan Group (ERW).