Baht likely to stay high until mid-2007

BANGKOK, Dec 3 (TNA) – Economists predict continued baht strength until the middle of next year and a booming stock market, but warned that a more dramatic braking of the US economy could yet see funds flowing out of the region as fast as they have flowed in.

Usara Wilaipich, senior economist at Standard Chartered Bank in Bangkok, said at a seminar on Investment Prospect in the Year of the Pig held by the Stock Exchange of Thailand, that Thai investors need to monitor the economic development in the US closely.

She attributed the baht rise to the recent influx of foreign investment into the financial and stock markets, pushing the baht, along with other Asian currencies, to record highs. Investor sentiment has been buoyed by low inflation, low interest rates and a healthy trade balance, Usara added.

However, the country’s general election, scheduled for the third quarter of next year, might prompt foreign investors to re-evaluate the political outlook, she warned. Profit-taking of the baht at that stage should come as a no surprise, she added, noting that an exchange rate of Bt39 to a US dollar was a real possibility.

Visit Ongpipattanakul, deputy managing director of Trinity Securities, opined that the prospect of easier monetary conditions in the US in the not-too-distant future would help sustain the bullish activities in the Thai stock market. The US Federal Reserve is seen as likely to ease monetary
policy next year as economic growth slows.

He said the SET index is likely to reach 760-770 early next year as a result. However, short-term profit-taking might cause sporadic volatility in the market.

TNA