Thai Share Prices Plummet To 8-Year Lows On Battered Baht

The reeling Thai baht plunged further to an all-time low on Thursday, pulling Bangkok share prices down to their lowest close in more than eight years. The baht punched through the psychological barrier of 40 to the dollar in late onshore market dealings amid active buying of safe-haven US dollars, dealers said.

The currency has steadily declined since it was floated on July 2, plummeting 35 percent from its flotation level.

The bearish domestic and regional economic outlook also drove corporates and foreign funds to dump baht for dollars to raise funds to repay foreign debts or repatriate profits, they added.

 

The Bank of Thailand intervened in the market earlier in the day to prop up the sliding baht but the move had only a temporary impact and was largely ignored by market players. At 1050 GMT, the baht was trading at 40.05 per dollar onshore.

Surprisingly, in the offshore market, which usually sees heavy speculation in the baht but was quiet due to a public holiday, the currency only hit a day low of 39.70 per dollar.

People gave all kinds of reasons for the bahts fall. But the fact is we (Thailand) have $21 billion (in short term debt) due between now and the end of this year, said a senior dealer at a foreign bank.

Some of that is being paid now. And if the debtors refused to roll over, it could be worse. And political and economic concerns could cause just that, he added.

Chatri Sophonpanich, chairman of Bangkok Bank also blamed the bahts plunge on a lack of confidence. Corporates and importers rushed to buy the greenback because they believed the baht would drop below 40 and that panicked the market, he said. Dealers said they expected the baht to remain under pressure at current record-low levels unless some good news emerged. But we dont see any good news on the horizon, said a dealer.

Thailand is facing its worst economic crisis in decades with big troubles in its debt-ridden finance and property sectors. The authorities have suspended 58 finance companies and set up a Financial Restructuring Agency as part of sweeping reforms to revive, merge or liquidate the firms.

In August, the government accepted a $17.2 billion bailout package brokered by the International Monetary Fund to help beat a liquidity crunch and put its battered economy on an even keel.

But investors have expressed concern that Thailands implementation of financial reforms may be riddled with political interference or may be slower than expected.

A media report, later denied by the government, that Thailand might renegotiate the IMF bailout package was viewed by the markets as a sign of political interference, analysts said. Compounding investor worries were political uncertainties as embattled Prime Minister Chavalit Yongchaiyudh faced intra-party bickering in his six-party ruling coalition. His administration, which is preparing the passage of electoral laws in parliament to set the stage for a house dissolution and fresh election early next year, is now viewed by analysts as a lame-duck, caretaker government.(Reuters)

As the baht staggered into uncharted territory, nervous stock market investors dumped shares, dragging the index down 2.64 percent or 12.07 points to 445.09. The closing level was the lowest since April 3, 1989, when it ended at 443.71.

I think the big story for the stock market was that the dollar was weakening against just about everything else but the baht, said a local analyst.

Brokers said the markets near term future also hinged on the direction Wall Street would take on Friday and the quality of the latest leading monthly economic indicators due to be released by the central bank on Friday.

I think a lot tomorrow will depend on the Dow Jones tonight and tomorrows foreign reserves numbers, though we dont expect much, said a trader.