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CNY & Bomb Attacks Weakens THB Further
Aspire | 20 August 2015
By: Vance Wong
Articles (74) Profile

USD/THB 5-year range; Source: S&P Capital IQ

Previously, the USD/THB has hit a multi-year high of 35.561 on 12 Aug because of the Chinese Yuan (CNY) devaluation, Maybank Kim Eng (MBKE) reported. The Thai Baht (THB) slowly recovered shortly after that but it was short-lived.

A terrorist attack hit Bangkok’s tourist district on 17 August 2015, killing more than 20 people and injuring more than 100. It was reported that the bomb was specifically targeted at tourists.

Another bomb was set off at a pier in Bangkok on 18 August but no one was hurt. Nevertheless, fear among tourists and locals would continue to increase.

A bigger headache for Thailand has yet to come as economists are saying that the CNY might prepare for a second devaluation. MBKE thinks that the terrorist attacks might worsen investor sentiments, and might drive the USD/THB to hit the 36-figure.

THB Vulnerability Increases


According to past MBKE reports, they had found that the Chinese stock rout on 8 July and the recent CNY devaluation showed apparent increased economic and trade links between the two countries.

With concerns of a further devaluation of the CNY, THB might continue to weaken. Furthermore, the recent terrorist attacks would impact the tourism sector substantially.

According to the most recent Thailand’s 2015 Gross Domestic Product (GDP) report, tourism is one of the two main growth drivers. This is no wonder the MBKE’s analysts are pessimistic about THB’s strength, at least in the near to mid-term.

Foreign Funds Sell-Off of Thai Equities

To make matters worse, foreign funds have already been engaged in sell-offs of equities and government debt, a net of THB52.49 billion and THB11.36 billion respectively. It is no surprise that funds are selling-off their government debt holdings, considering that it is currently ASEAN’s worst performer in this respect.

However, with such a huge sell-off in Thai equities happening before the terrorist attack, the USD/THB would continue climbing. Investors who are looking for alternative asset classes would definitely want to avoid the CNY and THB during this period of volatility and pessimism.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

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