Thai asset rally set to extend on tariff relief and steady foreign inflows
Malayan Banking Bhd. forecasts the baht will strengthen to 31.5 per dollar by year-end, while Bank of America Corp. projects a higher move to 31.0, a level not seen since March 2021. The local currency traded 0.1% lower at 32.369 per dollar on Monday.
Thai markets are closed for a holiday on Monday and Tuesday.
The baht has emerged as Asia's top performer this quarter, buoyed by the tariff agreement with Washington that has brightened the outlook for Thai exports.
Easing worries about domestic politics and expectations of another interest-rate cut by the Bank of Thailand this week may also sustain capital inflows, bringing Thai stocks closer to a bull market.
"We are keeping a medium-term positive view on the baht, expecting that both equity and bond inflows can somewhat stay supported on further Bank of Thailand rate easing and tariff clarity,' said Alan Lau, a currency strategist at Maybank in Singapore.
Local stocks have rebounded more than 18% from a low in June as foreign funds return. That's put the benchmark SET Index among the top-performers globally this quarter.
Thailand's export outlook has improved after President Donald Trump decided to lower tariffs on the nation's goods to 19% from 36%. The Finance Ministry raised its growth forecast for this year as it lifted projections for foreign shipments.
Since April, dollar-baht has traded under its 100-day moving average within a descending channel that may see the pair approaching the 31.50 level. Given the bearish momentum, the pair could test the sub-32 level, and a close below the July low of 32.108 will increase the chances of this occurring.
Equity Flows
Global funds turned buyers of local shares this quarter after three-straight quarters of outflows. They have purchased $640 million of Thai equities on a net basis since the start of July.
"Most companies' stocks still have very attractive valuations with better-than-expected earnings so far this year,' said Varorith Chirachon, an executive director at SCB Asset Management, the nation's largest private money manager with about $53 billion of assets.
Chirachon expects the key stock index to hit 1,320 at year-end. That's 4.8% higher than the gauge's close on Friday.
To be clear, risk of an economic slowdown in the second half remains as frontloaded orders end and US tariffs take effect. Uncertainty over the future of suspended Prime Minister Paetongtarn Shinawatra also lingers.
Constrained domestic demand could counter the risk of fading exports in the second half, "resulting in a stable current account surplus position and baht appreciation pressure,' said Claudio Piron, co-head of Asia FX and rates strategy at Bank of America.
--With assistance from David Finnerty and Michael G. Wilson. -- ©2025 Bloomberg L.P.
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