Global funds are ditching Thai bonds amid perceptions of political risk before next month’s election, but history suggests they may soon come rushing back.
Overseas investors have
offloaded a net $750 million worth of Thai debt this month, the biggest selloff in emerging Asia based on divergence from the 12-month average.
Foreign funds also sold Thai bonds prior to the previous elections in 2014 and 2019, but inflows then surged after the votes took place.
In the present “lame-duck session” before the elections, bonds and currencies face a level of uncertainty over how political parties plan to fulfill their populist pledges, said Kobsidthi Silpachai, head of capital market research at Kasikornbank. After the vote, there may be a relief rally depending on the formation of the coalition government, he said.
Global investors cut holdings of Thai bonds by an average $308 million in the three months leading up to the prior polls in 2014 and 2019, according to analysis by Bloomberg.
Foreign inflows then surged to an average $1.4 billion in the three months after the elections were over.
While international investors cut holdings of Thai bonds in the run-up to those previous votes, they increased purchases of Indonesian and Malaysian debt over the same period, indicating the outflows from Thailand weren’t driven by any external catalyst.
Source: Bloomberg
