Foreigners pull money out of Thai stocks and bonds

THAILAND - Foreign investors' extended retreat has raised their net-sell position in the Thai stock market so far this month to Bt18.7 billion (S$7.4), amid the raging political chaos at home and rising volatility in the global financial market.

Yesterday alone, foreign investors sold Thai shares worth Bt10.2 billion against purchases of Bt5.9 billion, resulting in net sales of Bt4.28 billion. This followed the Bt3.3 billion in net sales on Tuesday and over Bt1 billion on Monday. The year-to-date net-sell has ballooned to Bt123.95 billion. Global funds have also pulled some investment from Thai equities this month.

The baht opened at 31.61 per US dollar before closing at 31.60. On Monday, it fell as far as 31.705, the weakest level since September 18. The baht has given up 1.5 per cent over the past two weeks.

Besides the prolonged political protests, and despite the call from the private sector for all demonstrations to end, the baht was also marching along with other Asian currencies as investors waited for a clearer sign on the beginning of "tapering" in the US.

New Federal Reserve chairwoman Janet Yellen will appear before US senators today to defend her nomination as Fed policy-makers debate whether the stimulus policy known as quantitative easing is still needed to shore up the world's largest economy.

The greenback rose against the Singaporean dollar, Taiwanese |dollar, South Korean won, Indian rupee and Philippine peso.

World Bank President Jim Yong Kim said on Tuesday in Washington that emerging markets are likely to see considerably more impact from higher US interest rates when the Fed pulls back from its massive monetary stimulus.

In May, then Fed chairman Bernanke shocked emerging markets when he raised the possibility that the US central bank could soon embark on a drawdown in its bond-buying programme. Thailand, Malaysia and Indonesia were particularly hard hit by capital outflows after Bernanke's comment.

"We think we've seen about a third of the overall increase in interest rates responding to that first announcement," Kim said.

"As US interest rates go up, what we're going to see is it will be even more difficult to get access to the kind of capital for infrastructure investment that developing economies need."

Prasarn Trairatvorakul, governor of the Bank of Thailand, insisted that there was no irregularity in capital outflows from the country. Movements in the stock and bond markets as well as in foreign exchange rates remained "orderly". There was no special concern that required action from the central bank.

"Overall, the condition is in order," he said, implying that all the proceeds from the dumping of Thai shares and bonds have not yet left the country.

Foreign investors are just keeping a close eye on the unfolding political situation.