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Thai baht rises, stocks outperform as election points to pro-army win
[BANGKOK] Thailand's baht strengthened on Monday as results from the country's first election since a 2014 military coup showed a likely win for a pro-army party, seen by investors as likely to continue recent economic reforms.
The Southeast Asian nation's stocks weakened, weighed by broader concerns about the prospect of a US recession, but they sold off less than most other global markets, a sign investors were positive about the country's prospects.
Unofficial results will be announced on Monday afternoon, and it remains unclear if the Palang Pracharat party backing junta chief Prayuth Chan-ocha will have enough seats for him to stay on as prime minister.
However, the prospect of continuity, with the possibility of Mr Prayuth remaining in office, is positive for Southeast Asia's second-largest economy and encouraged foreign fund inflows, analysts and fund managers said.
"The continuation of economic policies for investors seems to be likely," said Kobsidthi Silpachai, head of capital markets research of Kasikornbank. "This should help boost investors' confidence to a certain degree."
The baht rose 0.4 per cent against the dollar at 0545 GMT. It is up about 3 per cent against the greenback this year, making it Asia's best performing currency.
Thailand's benchmark stock index dropped 0.89 per cent at the lunchbreak, in line with broader Asia declines.
"The stock market should have risen, but it's down because global markets are unfavourable," said Paiboon Nalinthrangkurn, chief executive officer of Tisco Securities.
"Investors may want to wait for more clarity. If they are confident that our politics are stable, they should come back".
The benchmark has risen 4.3 per cent this year, but foreign investors dumped shares after last month's surprise and short-lived entry of the king's sister into politics threw the election into turmoil.
Investors sold a net 11.2 billion baht ($479.9 million) in shares this year, after unloading a record 287.5 billion baht in 2018.
With 94 per cent of polling counted, the election commission reported that the pro-junta Palang Pracharat was leading with 7.69 million votes. The Thaksin-linked Pheu Thai Party trailed with 7.23 million votes.
Narongsak Plodmechai, chief executive officer of SCB Asset Management, which has 1.5 trillion baht under management, said while institutional investors have been defensive towards Thai stocks, the election result could change that.
But while a stable government would allow Mr Prayuth to continue economic policies and large infrastructure projects, investor risks still dot the political landscape.
Nomura analysts said further baht appreciation could be limited with political uncertainty remaining elevated and the risk that a government mandate might not be as strong as markets had hoped.
"In the medium-term, we could see Thailand return to extended political instability if Mr Prayuth cannot maintain the confidence of the lower house, where he is unlikely to command a majority," said Aaron Connelly, research fellow at International Institute for Strategic Studies.