Bangkok 11 Jul-Financial Markets Group Siam Commercial Bank (SCB FM) looks at trends in capital flows and the baht, assessing 3 assumptions depending on the timing of government establishment and the appointment of the prime minister. If done quickly, capital may flow in, causing the baht to continue to appreciate. But if there is a protest, the baht weakens to 36 baht / US dollar.
Mr. Wachirawat Banchuen, Senior Financial Market Strategist The Siam Commercial Bank Public Company Limited revealed that capital flows have continued to flow out of both the Thai stock market and government bond market since before the election. and even though the election is over But there is still a lot of political uncertainty in Thailand. both in regard to the position of Prime Minister coalition government Including the time to form the government This will affect the continuity of government policy implementation and implications for the Thai economy. For this reason, the confidence of foreign investors has not improved much. Capital flows therefore have not clearly flowed back in.
During past elections Capital flows also flow out of the Thai financial market, but at different rates. If the uncertainty situation lasts longer will cause capital to flow out more than in 2014 where uncertainty is higher due to the appointment of the Prime Minister takes longer and protesting the election As a result, capital flows out of the Thai financial market in greater amounts. And it took longer for the capital to flow back. Also, the amount of capital flowing back is less. However, the 2019 elections are less uncertain. causing capital to flow out of Thailand at a lower rate and flow back in more than after the appointment of the Prime Minister
Mr. Wachirawat continued that the scenario of the prime minister appointment situation This week will affect the trend of capital flows. and the baht Including the yields of Thai government bonds very much, divided into
Case 1 The government can be formed quickly, the far-reaching party has gathered more than 376 votes from both MPs and senators, making the government establishment likely not to take long. The implementation of government policies should be uninterrupted. Capital flows back into the Thai financial market in the short term. As a result, the baht may appreciate due to improved sentiment (relief rally). However, in the medium to long term, The baht may come back to weaken. depending on the policy of the Progressive Party which may have an economic restructuring and government policy guidelines
SCB FM suggests importers may gradually buy USDTHB in the short-term with a relief rally, looking at a frame around 34.40-34.85, while exporters may wait for a moment to sell after the rally, looking at a frame around 35.40-35.55.
In the second case, the government was established more slowly. But there was no protest: the Kaow Lai Party was unable to collect all 376 votes, forcing them to nominate the prime minister from another party, with a high probability of coming from the Pheu Thai party. Capital will flow out of the Thai financial market when the vote is not yet passed. causing the baht to depreciate in the short term But after getting Prime Minister from Pheu Thai Party Capital flows may gradually return. Due to the policies of the Pheu Thai Party tending to be more pro-market, the baht is likely to appreciate in the medium term.
SCB FM advises export customers to gradually sell USDTHB during the initial weakening period. by looking at the frame at 35.40-35.75, while importers may wait for a moment to buy after the Prime Minister which the baht should return to the range of 34.85-35.10
Case 3 The government is established more slowly. And there was widespread protest: the Pheu Thai Party nominated the Prime Minister. Ready to change the pole to form a government As a result, the government establishment period will be longer than scenario 2. Capital flows out of the Thai financial market continuously and more than scenario 2, causing the baht to depreciate even more. may come in less than the first two cases Appreciation in the fourth quarter may therefore be less than other cases.
SCB FM recommends that export customers may set a selling target of USDTHB in the future at approximately 35.75-36.00, while importers may consider buying a Call option at a strike price of approximately 35.20 to mitigate the risk of a rapid depreciation of the baht.-Thai News Agency
Source: Thai News Agency