Thailand's bullish economic recovery is attracting high volumes of foreign fund inflows into Thai bonds and stocks, pushing the baht to a seven-month high, making it the strongest currency in Asia year-to-date.
According to Kasikorn Research Center, the bond market received 127.79 billion worth of net overseas investors' capital in the period between the beginning of 2022 to mid-February.
This brought foreign investors' total holdings of Thai bonds to 1.15 trillion baht, setting a new record of the highest value of foreign bond-holdings in three years.
Meanwhile, a net buy in the Thai stock market from foreign investors amounted to 64.58 billion baht from the beginning of 2022 to mid-February. However, things to keep a close watch on are data on Thailand's fourth quarter of last year, January's export figures, the direction of foreign capital funds, the pandemic and tensions between Russia and Ukraine.
As for the baht's gradual appreciation, the significant foreign capital flows into the Thai stock and bond markets became an important factor in strengthening the currency's value. On Feb 17, the baht hit the highest level in seven months at 32.20 baht per dollar, making it the strongest currency in Asia year-to-date.
In addition, the baht's appreciation during this period could be attributed to gold trading and the selling off of the US dollar. However, it is crucial to keep a close watch on the US Federal Reserve's March meeting as the Fed will decide whether to hike the interest rate or not.
Kasikornbank forecasts that the baht's movement for this week will range between 31.80 and 32.70 baht per greenback.
Takit Chardcherdsak, research manager at Asia Plus Securities (ASPS), assessed the impact of the baht's appreciation on the export sector by looking into agricultural, food and electronics stocks.
He forecast net profit of these export sector-oriented stocks would decrease by 4.4% and later cause the net profit of electronics stocks to fall around 5.8% if every one baht appreciates per one dollar. The calculation is based on the assumption that 35 baht equals one dollar.
Therefore, Mr Takit advised investors who have these stocks in their portfolio to consider the risk of the baht's appreciation on their investment to suit the current situation.
In general, appreciation of the baht will benefit large cap stocks, especially companies with high foreign debt, such as power plants, because the debt burden will be reduced and the cost of importing machines and goods will dip.
Stocks that directly benefit from the baht's appreciation are Gulf Energy Development (GULF) and Global Power Energy (GPSC).
At the same time, Bumrungrad Hospital (BH) and CP ALL (CPALL) will also benefit from the country's reopening and economic recovery.
