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EMERGING MARKETS-Thai stocks jump as BOT says economy recovering

Credit: REUTERS/ATHIT PERAWONGMETHA

Thai stocks turned positive on Wednesday after its central bank held interest rates as expected and predicted second-quarter output would be better than forecast, while warning it was ready to quell gains for the baht.

By Rashmi Ashok

Aug 5 (Reuters) - Thai stocks turned positive on Wednesday after its central bank held interest rates as expected and predicted second-quarter output would be better than forecast, while warning it was ready to quell gains for the baht.

The bank, which already has rates at a record low of 0.5%, said exports were gradually recovering and expected inflation back on target next year, while saying it does not want the baht to rise "too fast" and has the tools to act.

Thailand's economy relies heavily on its exports, which have already fallen sharply in the pandemic, and appreciation of the currency now would make its products more expensive and less competitive globally.

BOT also kept the door open for further easing with its range of monetary tools, if necessary, which sparked talks of the central bank turning to unconventional measures to manage the economy.

"This may sustain the noise about quantitative easing (QE) and yield-curve control, however, I think it will remain a noise rather than becoming a reality in the near term," ING economist Prakash Sakpal said.

"The negative interest rate is just a far cry for an emerging economy and it's unlikely to serve the purpose of boosting the demand. Absent any more easing via policy rates, or QE, we are in for a prolonged policy stalemate," Sakpal added.

Bangkok shares .SETI climbed 0.5% in response, while the baht THB=TH held its gains against the dollar.

Currencies and stocks across Asia were all higher, with the ringgit MYR=, the won KRW=KFTC and the Taiwan dollar TWD=TP all up.

Indonesian stocks .JKSE ticked lower after data showed the economy shrank by a sharper-than-expected 5.32% in the second quarter, the first time since 1999. The index later recovered to gain 1%, while the rupiah IDR= barely budged.

The Reserve Bank of India meets on Thursday, with consensus split between a cut or hold to interest rates.

Soaring coronavirus cases, a plunge in manufacturing output and lower chances of further fiscal stimulus due to deteriorating public finances all build a case for further monetary accommodation, analysts at ING said.

Analysts at DBS Research said they did not anticipate a cut now, but predicted 50 basis point reduction in the second half on mounting downside risks to growth.

Perhaps as important as the decision will be the RBI's guidance on a moratorium on loan repayments, which is set to expire by August-end, and what that means for Indian banks struggling with bad debts, they said.

HIGHLIGHTS

** Top gainers on the Thailand's SETI .SETI included JCK International PCL JCK.BK up 14.52% and Global Consumer PCL GLOCON.BK up 14.29%

** Thailand's 10-year government bond yields fell 2 basis points to 1.2%​​ while 3-year benchmark yield rose 1 basis point to 0.56%​​

** In the Philippines, top index gainers were BDO Unibank Inc BDO.PS up 4.42% and Semirara Mining and Power Corp SCC.PS up 4.4%

Asia stock indexes and currencies at 0814 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

-0.02

+2.73

.N225

-0.26

-4.83

China

CNY=CFXS

+0.33

+0.16

.SSEC

0.17

10.74

India

INR=IN

+0.19

-4.71

.NSEI

0.15

-8.69

Indonesia

IDR=

+0.21

-4.41

.JKSE

1.03

-18.61

Malaysia

MYR=

+0.55

-2.55

.KLSE

-0.10

-0.91

Philippines

PHP=

+0.12

+3.30

.PSI

1.01

-25.36

S.Korea

KRW=KFTC

+0.45

-2.73

.KS11

1.40

5.20

Singapore

SGD=

+0.18

-1.90

.STI

1.29

-20.94

Taiwan

TWD=TP

+0.11

+2.03

.TWII

0.73

6.71

Thailand

THB=TH

+0.23

-3.52

.SETI

0.66

-15.20

(Reporting by Rashmi Ashok in Bengaluru; Editing by Patrick Graham and Rashmi Aich)

((Rashmi.Ashok@thomsonreuters.com; +918061822604;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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