Downward trend for SET, weaker baht anticipated

“The signal of baht weakening will push away foreign inflows in the short term,” ASP said in a research note.
The most recent baht depreciation against the US dollar is a fresh sign. This followed foreign sell-offs of short-term Thai bonds, the brokerage said.
Tisco Securities believes the SET Index is likely to fall to 1,470 points if the baht continues to depreciate and encourage short-term profit-taking.
Foreign inflows to the Stock Exchange of Thailand from the beginning of this year reached Bt117.4 billion (about US$3.4 billion), compared with nearly $3 billion into Indonesia and about $1 billion into the Philippines.
The SET has so far this year gained nearly 16 per cent, but volatility is expected.
The SET Index ended at 1,496.90 points yesterday, up 4.38 points or 0.29 per cent but far from recouping Monday’s loss, when it fell by 28.96 points or 1.90 per cent.
Volatility in the bond market is also anticipated, after inflows of about $3 billion in the corresponding period – the most since 2014.
These inflows helped push up the baht against the greenback by about 4 per cent from the beginning of this year.
Among global currencies, the baht’s strengthening ranks seventh, compared with Japan’s yen, No 1 with appreciation of 16.37 per cent.
The tide has changed, however. Since Friday, the baht has weakened by 0.5 per cent to 34.75, the worst performer among Asian currencies.
While selling Thai shares for a net Bt821 million yesterday, foreign investors were net-buyers of Thai bonds, mostly short-term, at Bt2.76 billion.
Four days before yesterday, foreign investors were net-sellers of Thai bonds, at Bt4.66 billion or about $135 million.
“Looking forward, Maybank FX Research believes external challenges are likely to impact the dollar/baht rate, particularly the US Federal Reserve’s resumption of its interest-rate increases, the US presidential election and post-Brexit developments,” said the house’s economist, Tim Leelahaphan.
The baht could hover around 34.50 by the end of this month, before weakening further to 34.70 at the end of 2016 if the US interest-rate increase takes place in December.