September 2, 2008 / 5:02 AM / 11 years ago

Thai emergency hits baht and shares, but bonds rise

BANGKOK, Sept 2 (Reuters) - Thai stocks neared a 19-month low and the baht hit a one-year low on Tuesday after the prime minister imposed emergency rule, but domestic government bonds rose as local investors sought somewhere safe for their funds.

Shares in the tourist sector were sold as some foreign countries told their citizens to avoid travel to Thailand.

The main stock index .SETI opened down 2 percent at 661.67 as investors sold blue-chip energy and bank stocks, but the index recovered to show a 1.8 percent fall at 0445 GMT. The market has fallen around 24 percent since street protests began on May 25. Thai Prime Minister Samak Sundaravej declared a state of emergency in Bangkok on Tuesday and gave the army control of public order after a man died in overnight clashes between pro- and anti-government protesters. [ID:nSP120651].

“Announcing a state of emergency is proper and timely. But if you ask me if this is the beginning of the end? No, it isn’t,” said Puwadol Lapudomsuk, a senior strategist at Asia Plus Securities, adding he expected a gradual fall, not panic selling.

Kosin Sripaiboon at UOB KayHian Securities felt the same.

“Selling will be coming from both sides, foreign and local investors, but I don’t really think panic selling will be as bad as when the former government imposed a 30 percent capital control measure,” he said, referring to the record one-day fall of 14.8 percent in reaction to capital controls in December 2006.

Bourse chief Patareeya Benjapolchai remained calm. “The circuit breaker system will work automatically if the market falls sharply to a certain point but right now everything is manageable,” he said.


The baht THB=TH was weaker, in line with other Asian currencies, trading around 34.45 per dollar, having fallen about 0.6 percent to a one-year low of 34.49 earlier despite suspected central bank intervention, dealers said.

“The stand-off without swift resolution will be damaging for the Thai baht,” said Christy Tan, a currency strategist at Bank of America in Singapore, as anti-government supporters continued to occupy the prime minister’s official compound.

Investors in Thailand’s international, dollar-denominated bonds have taken fright at the political crisis, but domestic debt continued its recent strong run, with yields dropping and prices rising <0#THTSY=><0#THBMK=>.

“Political noise reduces the attractiveness of risky alternatives to safe-haven government bonds,” ING analyst Tim Condon said in a report.

Five-year bond yields TH5YT=RR were down 16 basis points (bps) and seven -year yields TH7YT=RR down 11 bps.

Ten-year yields TH10YT=RR slid 10 bps at one stage, having fallen some 180 bps from their June peak as investors took the view that both inflation and interest rates have peaked. At 0450 GMT the yield was at 4.46 percent.

But five-year credit default swaps (CDS) THAILD5UA=GFI — the cost of protecting against a default in Thailand’s dollar-denominated debt — widened by as much as 10 bps to 150.

The CDS later tightened to 146 bps, a Hong Kong trader said, meaning it would cost investors $146,000 to protect against $10 million of sovereign debt annually for five years.

On the stock market, shares in national carrier Thai Airways (THAI.BK) were flat at 13.60 baht after falling 2.9 percent to a record low of 13.30 baht in early trade.

Airports of Thailand (AOT.BK) was down 0.67 percent at 37.25 baht, having hit a low of 37 baht. Several airports were closed by protests at the end of last week but have now reopened.

Among leading stocks, top energy firm PTT (PTT.BK) fell 3.82 percent and market leader Bangkok Bank (BBL.BK) fell 2.6 percent. ($1=34.43 Baht) (Additional reporting by Rafael Nam in Hong Kong, Kevin Yao in Singapore, Ploy Chitsomboon and Viparat Jantraprap in Bangkok; Editing by Alan Raybould)

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