Thai Currency Increases in Strength as Foreign Investments Pour into Bonds during Global Economic Volatility
Investment inflows bolster Thailand's debt market, buoying Thai baht amidst market volatility
Foreign investment in Thailand's debt market has surged, pushing the Thai baht to a 32-baht-to-US-dollar mark, as the US dollar loses ground following US President Donald Trump's aggressive trade policies.
From early 2025 until May 22, foreign investors have collectively purchased over 70 billion baht in Thai debt instruments, with analysts anticipating continued investments due to projected high market volatility from Trump's policies.
Pachara Anantasilp, Director-General of the Public Debt Management Office, affirmed that international investor confidence in Thailand's financial and fiscal stability is robust. The Thai bond market's exceptional performance has surpassed expectations and is likely to continue until year-end.
Despite Moody's Investors Service recently downgrading Thailand's credit outlook from 'Stable' to 'Negative', investors remain confident, viewing Thai bonds as relatively safe assets with lower risk, even if returns are not exceptionally high.
According to Koraphat Vorachet, Assistant Managing Director and Head of Research at Krungsri Securities Plc., foreign capital inflows into the bond market are accelerating, with $2 billion flowing into Thai bonds since the start of the year. The second quarter alone has seen inflows reach $1.7 billion, primarily directed towards medium and long-term bonds.
The Thai stock market, however, is currently in a consolidation phase, waiting for new catalysts to attract Asian inflows. Nevertheless, the positive momentum in the bond market is expected to foster liquidity, potentially enhancing the sentiment for Thai equities moving forward.
Roong Sanguanruang, Senior Director of Global Markets Strategy at Bank of Ayudhya Plc., attributed the baht's appreciation to foreign capital inflows into Thai debt, both short and long-term, following the US dollar's diminished appeal as a safe-haven asset post-Trump's trade stance.
While the Thai stock market has yet to see significant foreign inflows, foreigners have net-sold 55 billion baht in Thai stocks from the year's start until May 9. Expectations of a current account surplus during the 90-day US trade truce and favorable US-Thai trade agreements could bolster exports and aid Thailand's economic recovery this year.
Ariya Tiranaprakit, Deputy Managing Director of the Thai Bond Market Association (ThaiBMA), views the current fund flow situation in the bond market as normal market dynamics. She underlined the stability of the Thai bond market, with foreign net purchases of over 70 billion baht since the year's beginning until May 22, while anticipating continued inflows due to Trump's policies creating higher market volatility.
While the inflows are predominantly long-term investments, analysts caution that rapid shifts in global economic conditions or US trade policies could lead to a reversal of capital flows, potentially destabilizing the currency and economy. Furthermore, the Thai economy's dependence on foreign investment makes it vulnerable to changes in investor sentiment and economic conditions, limiting its ability to control its own economic trajectory.
However, if managed carefully, these inflows can provide Thailand with the necessary capital to finance projects, stimulate economic growth, and enhance its purchasing power. As the global landscape changes, it is crucial for policymakers to adapt and navigate these shifting currents to ensure sustainable economic growth for Thailand.
- The surge in foreign investments in Thailand's debt market, driven by international confidence in the country's financial stability, is influencing the stock market as well, potentially enhancing sentiment for Thai equities.
- The exceptional performance of the Thai bond market, coupled with the US dollar's diminished appeal as a safe-haven asset, is causing the Thai baht to appreciate, reaching a 32-baht-to-US-dollar mark.
- Despite Moody's Investors Service downgrading Thailand's credit outlook, investors continue to show confidence in Thai bonds, seeing them as relatively safe assets with lower risk, even if returns are not high.
- Foreign capital inflows into the bond market are predicted to foster liquidity, and if managed carefully, these inflows can provide Thailand with the necessary capital to finance projects, stimulate economic growth, and enhance its purchasing power.
- Investors are increasingly focusing on personal-finance matters, with substantial foreign net purchases of over 70 billion baht in Thai debt instruments since the year's beginning, demonstrating an interest in long-term investments in the Thai economy.
