By Ewen Chew
SINGAPORE--Thailand's baht rose to its strongest level in eight
months and the nation's stocks touched the highest in a year as
signs accumulate that the economy is rebounding following two
months of army-enforced political stability.
The currency's gains have picked up in recent days. It has
climbed 1% since Friday, and is up 2.3% since the military took
power in May, pledging to restore order and reinvigorate the Thai
economy after months of protests. Stocks, too, have rallied, rising
for five straight weeks, although they pulled back slightly Tuesday
in late trading.
The investor optimism has been sparked by increased fiscal
spending, including on big-ticket infrastructure projects and
millions of dollars of overdue payments for rice farmers under a
rice-subsidy scheme. The National Economic and Social Development
Board last Saturday upgraded its growth forecast to 2% this year,
from an earlier estimate of 1.5% made three days before the
military coup.
In addition, exports rose 7.2% in June from a year earlier, Army
chief Prayuth Chan-ocha said last week.
Currency trader Goh Rong Ren, from Skandinaviska Enskilda Banken
AB in Singapore, estimates that around $2 billion worth of baht was
bought in Monday's rally, when the currency broke 32 per dollar.
The baht was at 31.85 Tuesday, compared with 31.89 late Monday. A
lower number means a stronger baht.
Foreign investors have been buying stocks too. They have
invested a net $512 million in July after $13 million in net
outflows the previous month, according to Nomura, who says the
portfolio inflows are likely to continue in the near term.
Thai stocks slipped as much as 1% Tuesday before recovering
slightly to trade 0.8% lower.
Desmond Chua, a regional equities analyst at CMC Markets in
Singapore, noted that the Thai stock market this year has generated
among the best returns in the region despite the political
crisis.
Still, Nomura cautions that the baht's rally may not have much
further to go because a lack of confidence in the junta's economic
plans is likely to prevent economic growth from accelerating
significantly further.
It says it believes the baht will weaken over the medium term
and is waiting for "an opportune time" to recommend to clients to
bet against the currency.
Write to Ewen Chew at ewen.chew@wsj.com