Thai Baht Slumps to One-Year Low, Stocks Decline on Recession

[Bloomberg] Thailand’s baht slumped to a one-year low and stocks dropped after Southeast Asia’s second-largest economy entered a recession for the first time since 2009. Government bonds were little changed.

Gross domestic product unexpectedly decreased 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic & Social Development Board said yesterday. The agency cut its 2013 expansion forecast to 3.8 percent to 4.3 percent from 4.2 percent to 5.2 percent. The MSCI Asia Pacific Index of shares fell for a fourth day amid speculation the Federal Reserve will pare stimulus that inflated emerging-market asset prices.

“Risk sentiment is hurt due to declines in stocks,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Amid weak risk appetite, growth concern is further weighing on the currency.”

The baht slumped 0.9 percent, the most since June 20, to 31.64 per dollar as of 4:54 p.m. in Bangkok, according to data compiled by Bloomberg. It reached 31.80 earlier, the weakest level since July 25, 2012. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 67 basis points, or 0.67 percentage point, to 6.85 percent.

Stock Outflows

Thailand’s SET Index (SET) sank 2 percent to 1370.86 to close at the lowest since June 24, following a 3.3 percent drop yesterday. Overseas investors sold a net $115 million of Thai equities yesterday, the biggest outflow in six weeks, exchange data show.

“Thai economic growth may slow further in the third quarter as domestic consumption and exports are very weak,” said Voravan Tarapoom, the Bangkok-based chief executive officer of BBL Asset Management Co., which oversees about $12 billion of assets. “The weak economy may damp the outlook for Thailand’s equity market for most of this year.”

The Bank of Thailand will keep its benchmark interest rate at 2.5 percent tomorrow, according to 19 of 20 economists surveyed by Bloomberg. One sees a 25 basis point reduction.

BNP Paribas SA cut its 2013 growth forecast for Thailand to 3 percent from 4.5 percent, Philip McNicholas, a senior economist in Hong Kong, wrote in a research note today.

The yield on the 3.625 percent sovereign notes due June 2023 was little changed at 3.98 percent, data compiled by Bloomberg show. The cost to insure Thai bonds against default using five-year credit-default swaps climbed eight basis points to 128 basis points yesterday, the highest level since July 4, according to data provider CMA.

To contact the reporters on this story: Yumi Teso in Bangkok at; Anuchit Nguyen in Bangkok at

To contact the editor responsible for this story: Amit Prakash at

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