Socio-Economics History Blog

Socio-Economics History Blog

Thai Default Risk Soars as Funds Pull $4 Billion: Southeast Asia!

by mosesman

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  • The 1997 Asian Financial Crisis started in Thailand. Will history repeats itself?
  • Thai Default Risk Soars as Funds Pull $4 Billion: Southeast Asia! 
    by David Yong and Yumi Teso, http://www.bloomberg.com/, 20 Jan 2014
    The risk of Thailand defaulting on its debt rose to the highest since June 2012 as anti-government protests prompt money managers to sell the nation’s assets.
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    The cost of protecting the country’s debt soared after investors including Wells Fargo Inc. pulled more than $4 billion from Thai stocks and bonds since Oct. 31, as rallies clogged up Bangkok roads and clashes left nine dead with about 550 injured. Pacific Investment Management Co., Goldman Sachs Group Inc. and Kokusai Asset Management Co. reduced holdings before protests erupted in late October, regulatory filings show.
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    “We sold the entire Thai position in our international bond fund through the end of last year,” Lauren Van Biljon, an analyst in London at Wells Fargo’s First International Advisors LLC unit, said in a Jan. 17 telephone interview. “There seems to be a very wide gulf between the different political sides.”
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    A resolution of the crisis has eluded Prime Minister Yingluck Shinawatra since she dissolved parliament in December and called a snap poll for Feb. 2. Demonstrators want to remove her and end the influence of her brother, Thaksin Shinawatra, who was ousted by the army in 2006. Blasts rocked a protest site in Bangkok yesterday. The baht has slumped on bets the central bank will cut borrowing costs this week as the turmoil curbs growth and fuels speculation about a coup.
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    “We have remained underweight on the baht since late last year as the prolonged political unrest hurt the currency outlook,” Tatsuya Higuchi, a money manager at Kokusai in Tokyo, said in a Jan. 16 telephone interview. “There’s no fiscal support as the politics are in chaos. The only support they can provide under such a situation is monetary easing.”
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    Kokusai, Japan’s biggest mutual-fund manager with $36 billion of assets, cut its Thai bond holdings last year and will keep its existing stake for now, he said.
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    Default Risk
    Credit-default swaps insuring Thai debt against non-payment for five years rose to 158 as of 10:37 a.m. in London, versus 150 on Jan. 17, according to data compiled by Bloomberg. They touched 160 earlier today in Asian trading, according to CMA prices, the highest since June 2012. The spread has widened 53 basis points since anti-government protest broke out on Oct. 31, compared with increases of 30 for Indonesia and 19 for the Philippines.
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    The cost of protecting Thailand’s debt may reach 200, the highest since November 2011, according to Nordea Markets, a unit of northern Europe’s biggest financial group, which had about 228 billion euros ($309 billion) of assets under management as of Sept. 30.
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    “The upside risk to the CDS level is still pretty big, given the risk of military intervention,” Amy Zhuang, a senior Asian markets analyst at Nordea in Copenhagen, said in a Jan. 15 telephone interview. “The uncertainty is there, the turmoil is there. They are generally still calm but the risky and tricky parts haven’t fully played out at the moment.”
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    read more!

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