Thailand among emerging market economies in frame for gains from US rate cuts

Thailand is among those countries on the radar of global investors due to its high current account surplus and the ambitious plans for the Eastern Economic Corridor, a flagship investment scheme, said Homin Lee, head of portfolio solutions and Asia and Asia Macro strategist at Lombard Odier.
The Swiss private bank, which specialises in wealth and asset management, has divided emerging market countries into three groups: the most robust countries, sound but vulnerable countries and the weakest ones.
Thailand, China, India, Malaysia, South Korea, Russia and Peru are in the first group, said Lee. Thailand has a current account surplus estimated to be 6 per cent of gross domestic product this year and the persistent surplus makes the baht stable, he said. 
Those in the second group are Brazil, Mexico, Chile, Colombia, Poland, Hungary, the Philippines and Indonesia. The first and second groups are expected to benefit should the US Federal Reserve cut its policy rate – perhaps twice this year. The weakest countries are South Africa, Argentina and Turkey.
His comment came as the baht reached a six-year high against the US dollar, at around 30.5 to the greenback, and amid gains in the stock market.
The baht would appreciate further and it is expected to surpass 30 to the US dollar by the end of this year, though this would be positive for the economy, said Lee.
Thailand is in a better position than most as the country has many big public investment projects on the way. While the stronger baht may hurt exports and manufacturing, it could boost investment, Lee said. Lower global interest rates led by the expected Fed rate cuts would also boost other emerging market economies and Thailand could then export more products to these markets.
Lee also expected other currencies would appreciate against the US dollar as the Federal Reserve is expected cut rate twice during the rest of the year. He said that even though growth in the US and global economies is late in the cycle, investors still have investment opportunities - particularly in emerging market assets. Lee recommends that investors could hold 40 per cent of their portfolio in equities, 40 per cent in bonds and the rest in alternative investments.
Jirawat Supornpaibul, private banking group head at Kasikornbank (KBank, said that Thailand’s equity and corporate bond market are small, limiting investment opportunities, so Thai investors should look overseas. He said Kasikorn private banking can help customers deal with exchange rate risks by hedging, at a cost of only 0.7 per cent. “Our exchange rate hedge has proven that it can protect the interest of investors from the risks of losing money due to exchange rate volatility,” he said.