Thai Stocks, Currency Hold Up as Exports Outweigh Instability

May 24 (Bloomberg) -- Thailand’s benchmark stock index and currency are among the best performers in emerging markets as the nation’s economic growth outweighs the deadliest political clash in two decades.

The baht’s 0.9 percent gain since anti-government rallies began on March 12 makes it the top-performing currency among developing nations, according to data compiled by Bloomberg. The key share index climbed 3.8 percent, the most among 22 countries on the MSCI Emerging Markets Index after Morocco. It was also the best performer among Asia’s 10 biggest equity markets.

Firefighters in Bangkok extinguished blazes over the weekend that burned 39 buildings, following a military assault on May 19 to end the two-month protest in Bangkok. A government report today showed Southeast Asia’s biggest economy after Indonesia expanded at the fastest pace since 1995 last quarter, driven by exports.

“Fortunately, the manufacturing sector hasn’t been much affected by the political turmoil as the factories aren’t in central Bangkok,” said Takahide Irimura, head of emerging- market research in Tokyo at Kokusai Asset Management Co., which manages about $61 billion of assets. “Supported by a favorable current account, the baht will appreciate.”

The political conflict may curb consumption and imports, boosting the nation’s trade surplus and supporting the baht, Irimura said. Kokusai, whose Global Sovereign Open fund is Asia’s biggest bond fund, doesn’t provide forecasts, he said.

Baht, SET

The baht gained 0.2 percent to 32.38 per dollar as of 10 a.m. in Bangkok, according to data compiled by Bloomberg. Exporters are repatriating overseas income to buy baht as “the situation is under control in the capital,” according to Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl. The currency may trade between 32.25 and 32.50 this week, he said.

The cost of credit-default swaps insuring Thai government debt from default was little changed at 157 basis points, according to Royal Bank of Scotland Group Plc prices.

The SET Index dropped 1.7 percent to 752.84, reflecting the global rout on May 20 and May 21 when the bourse was closed because of violent clashes between demonstrators and security forces. The MSCI Asia-Pacific excluding Japan index slumped 2.8 percent during that time, to an eight-month low, on concern Europe’s debt crisis will crimp global growth.

Greek Crisis

“The Greek debt crisis and domestic political unrest have driven away overseas investors,” said Suppakorn Soontornkit, chief investment officer of MFC Asset Management Pcl, which oversees 230 billion baht ($7.1 billion) of assets. “As soon as the European debt concern dissipates, I am confident foreign investors will return to the Thai market.”

Suppakorn maintained his forecast that the SET may rise to between 820 and 887 this year. The company’s MFC Value Long Term Equity Fund was ranked the top large equity fund in 2009 by Morningstar Inc., a fund research company.

The eviction of anti-government protesters from central Bangkok will prompt a more prolonged flight from the stocks and currency markets by overseas investors, who expect the demonstrations to resume at some point, Sopawadee Lertmanascha, who manages about 447 billion baht of assets as secretary general of the Government Pension Fund, Thailand’s third-biggest money manager, said May 18.

Foreign investors cut their Thai stockholdings on each of this month’s 11 trading days, the longest stretch of net sales since November 2008, pulling 38.7 billion baht, according to data compiled by Bloomberg.

‘Less Rosy’

Finance Minister Korn Chatikavanij said on May 21 economic growth for the second quarter and beyond will be “less rosy” because of the deadly protests. Thai financial institutions, currency reserves, tax revenue and stock markets remain strong, he said at a press conference in Tokyo.

Thai Prime Minister Abhisit Vejjajiva yesterday extended a curfew put in place last week on concern demonstrations may break out again after the May 19 crackdown. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen, raising concern the unrest may spread beyond the capital.

The longer-term outlook is optimistic as foreigners decouple investment decisions from the riots, according to Mark Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management Ltd.’s Singapore-based chairman.

“The headlines show that it’s pretty much a disaster center,” Mobius said in a Bloomberg Television interview right after the May 19 crackdown. Still, investors are “differentiating these events and saying OK, there are problems and there’ll be disruptions, but the country will come out of it and investing and trade will continue.”

Economic Growth

Gross domestic product rose 12 percent in the three months to March 31 from a year earlier, after growing a revised 5.9 percent in the previous quarter, the government said in Bangkok today. That beat the 9 percent median forecast in a Bloomberg News survey and was the highest reading since the second quarter of 1995. A report this week may show exports increased for a sixth consecutive month in April, rising 37.5 percent from a year earlier, according a separate survey.

Losses in the baht have also been limited because the central bank controls speculative trading, according to Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The Bank of Thailand sets a daily cap of 300 million baht for trading accounts held by non-residents for investments in securities and other financial instruments.

“The baht is in fact one of the strongest performers in Asia this year and we expect the outperformance to continue, simply because there is much less foreign involvement,” said Thomas Harr, a strategist at Standard Chartered Plc in Singapore, who predicts the baht will gain to 31 by year end. “In a risk- off environment, there is definitely less impact on Thailand.”