Baht bounces after king’s death 

Thais are dressing largely in black. Source: YouTube

Thailand’s currency has strengthened against the US dollar for a second day running as the stock market surged to a four-day high. 

Investors have been braced for a period of potential volatility following the death of King Bhumibol Adulyadej.

Prime Minister Prayuth Chan-ocha said the government would mourn for a year and that Thais had been asked not to hold any celebrations for a month. But he called businesses and individuals to keep investing.

“On the economic side, whether it’s the stock market, trade, investment and business sector, please don’t stop,” the general said.

The baht was up 0.6 per cent against the dollar, after rising as much as 1 per cent earlier, Thomson Reuters reported. Over the week, however, the baht fell 0.9 per cent against the dollar.

“I think the Bank of Thailand is well prepared to defend the currency should it come under some massive selling pressure,” said Christy Tan of the National Australia Bank in Hong Kong. “They will have to manoeuvre very carefully.”

The king had been unwell for much of the past decade and the news of his death followed two announcements made over the past week about his deteriorating health.

The Bank of Thailand has built up its foreign currency reserves, possibly to defend the baht against any downward pressure, by selling foreign currencies and buying the baht.

Thai foreign-currency reserves, including the net forward position, rose to US$201 billion last month from US$169 billion last year.

The market had declined by 6.1 per cent this week, partially reversing gains through 2016 driven in part by overseas investment. Goldman Sachs reported that investors’ fund allocations toward Thai stocks were still “elevated”, leaving markets exposed to sudden outflows.

“Given growth risks, still high valuations and elevated positioning risk amid political uncertainty, we continue to expect Thailand equities to lag the overall region,” Goldman said.

But Sat Duhra of Henderson Global Investors said there was little uncertainty regarding the succession.

“The king’s death has the potential to cause volatility and potentially an opportunity to acquire quality names at a discount but should be short-lived as the crown prince is an obvious successor already fulfilling many royal duties.”