August 7, 2015 / 8:42 AM / 4 years ago

Foreign investors exit Thai stocks, bonds as economy flounders

* $1.46 bln of shares and bonds sold this year

* Selling accelerated in July

* Economy failing to hit growth targets

By Orathai Sriring and Viparat Jantraprap

BANGKOK, Aug 7 (Reuters) - Foreign investors have sold a net $1.46 billion of Thai shares and bonds this year as Thailand’s military government struggles to pull Southeast Asia’s second-largest economy out of a rut a year after seizing power.

Selling accelerated in July, when investors unloaded a net 22 billion baht ($625.89 million) of shares amid a slew of worse-than-expected economic data which led the Finance Ministry to cut its growth forecast for the third time this year.

“Economic weakness is certainly disappointing,” said Orsen Karnburisudthi, senior investment manager at Aberdeen Asset Management in Bangkok.

Aberdeen still saw some value in retail stocks and large banks, he said, despite subdued second-quarter earnings.

Thailand’s poor economic performance has hastened the exit from Thai and other emerging markets of investors positioning themselves for the first U.S. interest rate hike in nearly a decade.

The central bank has warned that growth may fall below 3 percent, the Finance Ministry’s latest forecast.

International investors have sold a net 39.8 billion baht of Thai shares to date in 2015. More than half was in July, when the index tumbled 4.3 percent, Stock Exchange of Thailand (SET) data showed.

As of May 2015, foreign investors still held 4.57 trillion baht of Thai shares, about 33 percent of market capitalisation, according to the SET.

Foreign funds have also unloaded a net 11.5 billion baht of Thai debt this year, according to the Thai Bond Market Association.

SMALL ROLE IN BONDS

Thailand, unlike some of its neighbours, does not rely on foreign investors to fund current account deficits. Foreign holdings in Thai bonds are relatively small.

Foreign investors hold about 625 billion baht ($17.77 billion) of Thai debt, or 6.5 percent of the total Thai bond market.

The baht has depreciated 6.4 percent against the dollar this year, among Asia’s worst performers, making Thai assets less appealing.

Thai authorities have encouraged the depreciation to spur exports, which are equal to about two-thirds of gross domestic product are expected to contract in 2015 for a third consecutive year.

Assistant Bank of Thailand Governor Mathee Supapongse said this week the depreciation has been “a little fast” but was helping economic growth.

Franklin Templeton, which manages over $3 billion of investments in Thailand, sees potential despite the economic gloom, said Mark Mobius, executive chairman of Templeton’s Emerging Markets Group.

“We believe there are still opportunities in Thailand and we are not exiting the country,” he said.

$1 = 35.1600 baht Additional reporting by Satawasin Staporncharnchai in BANGKOK and Umesh Desai in HONG KONG; Editing by Simon Webb and Richard Borsuk

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