New Fears for Thai Economy after Bangkok Blasts

BANGKOK ~ Thai shares sank on the first morning of trade after the deadly New Year’s Eve bombings in Bangkok, raising fears that the attacks could drag down the faltering economy.

The blasts that killed three and wounded 38 raised new fears about Thailand’s security and added to doubts about the post-coup government, which had already spooked markets last month with stringent new currency controls.

The Stock Exchange of Thailand composite index fell 22.12 points, or 3.25 percent in the morning trade to 657.72 on Wednesday, the first day of business after the New Year holiday.

The latest fall followed massive losses in mid-December after the authorities introduced and then quickly reversed measures aimed at halting the baht’s sharp gains.

The market lost nearly 15 percent on December 19 after foreign investors were scared off by steps to effectively lock up for a year 30 percent of any fund inflows coming into Thailand for financial investment.

As a result, the government backtracked and the market recovered much of the lost ground in the following days but the policy flip-flop left investors nervous about the outlook for Thailand and trading has remained volatile.

So far, the baht has remained strong against the US dollar, falling slightly from 35.90 on Friday to 36.15 on Wednesday.

Finance Minister Pridiyathorn Devakula told reporters after a cabinet meeting that the fact that the drop wasn’t steeper showed that “investors still have a certain level of confidence in Thailand’s economic fundamentals.”

But he urged the junta to restore confidence by finding those responsible for the coordinated explosions that hit a range of targets, including Bangkok’s central business district.

Santi Vilassaksanont, chairman of the Federation of Thai Industries, said the attacks added to doubts among foreigners and investors about the government and junta’s capacity to keep control both security and the economy.

“Investors are still worried, after the reserve requirement rules caused them to doubt government policies and its capacity to manage the economy,” Santi said.

Adisak Kammnool, senior stock analyst at KGI Securities, said foreign investors were more worried about the impact of the bombings on the economy, rather than the political uncertainties they raise.

“While they ignored the impact of political uncertainties in Thailand, they sold shares on concerns over declining consumption and investment after the blasts that rocked the business district in Bangkok,” he said.

“Those factors could lead to lower economic growth in Thailand than they had expected,” he said.

“As more risks arise in the Thai market, investors expect a lower rate of return in the Thai bourse this year,” he added.

Pornsilp Patcharintanakul, deputy chief of Thailand’s Board of Trade, warned tourism and trade could suffer because of the blasts.

“The damage caused by the bombings is huge because it makes people think Thailand is unsafe – especially since the incident happened in Bangkok, which is the business center,” Pornsilp said.

“The incident clearly showed Thailand’s political turmoil has yet to be resolved after the coup. The government has not been able to cope with political disorders and uncertainties,” he added.

But businessmen called on the government to restore investors’ confidence.

“The reserve requirement has scared away foreign investors. Now Thailand is not only unstable but there is so much uncertainty in many ways,” said James Peter Blaney Davison, vice president for international business development at giant retail Central Group.

“The government must try to assure the public of the state of security, otherwise the economy will nosedive.”

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