WEEKAHEAD-Thai baht seen holding, stocks to rise
09:59 p.m Sep 26, 1998 Eastern
By James Mclean
BANGKOK, Sept 27 (Reuters) - The Thai baht, which surged last Friday to four-month highs against the dollar, should hold below the 40.00 per dollar level this week while the local stock market is expected to remain buoyant, dealers and analysts said.
The baht ended the week at 38.90/39.00 per dollar, its strongest level against the greenback since mid-May, an appreciation of more than four percent from the previous Friday's close at 40.70.
Dealers said offshore funds were still scrambling for baht late on Friday, and though local banks were looking to buy the dollar back on the dip, it was offshore that would likely dictate market movements this week.
Bank of Thailand Governor Chatu Mongol Sonakul told reporters on Friday the baht's move was primarily linked to equity investment by foreign funds and the baht could hold at about current levels.
Dealers concurred with the governor's assessment though dollar support looked good at 38.50 and the market would be volatile.
''For this week I think it should be quite difficult to see 40 again but I think 38.50 is also looking like strong (dollar) support,'' said a senior dealer at a U.S. bank in Bangkok.
''But it is difficult to say which way it is going to go at the moment. Most of the market movement is coming from offshore and we are caught in the middle,'' he added.
The baht's rise, partly fuelled by a week-long foreign investor-based rally in Thai stocks, could also further encourage a resurgent local stock market.
The market has rebounded from off near-12-year lows in the last week to end on Friday at 248.93, a rise of 12 percent from the previous week's close.
Lower local interest rates and signs that Thailand is making solid progress towards economic recovery have attracted sizeable foreign buying for the first time since February.
Profit-taking, which saw the market break a seven-day rally on Friday, could continue on Monday but overall the short term outlook remained positive, analysts said.
''The interest rate scenario has been around for a long time but the assumption was that rate cuts would crush the baht, but the baht has remained stable for a considerable period of time,'' said Peter Redhead, head of research at ING Barings in Bangkok.
''For investors rebalancing portfolios within Asia they will by default have to look at Thailand...while there are worries about the economy and about an early election the risk premiums appear to be coming down,'' he said.
With Thai banks struggling to cope with still rising non-performing loans, investors have a limited choice of solvent, profitable and liquid industrial counters to choose from. Most fitting that criteria have already run up quickly.
National Petrochemical Co Plc and entertainment firm Grammy were good value plays, Redhead said.
Analysts and brokers said that though a comprehensive rally may have to await improved economic fundamentals, investors' perceptions had shifted to a feeling that Thailand was a possible turnaround play.
''I think the SET will outperform the rest of the region from here until Christmas, though possibly by default as most of the regional markets are still dropping,'' said Stefan de Baets, a senior trader at Seamico Securities Plc.
--Bangkok Newsroom (662) 253-5000 ext 400
--e-mail: rtrburo+ksc15.th.com
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