We expect the baht to recover its losses against the US dollar. The decent tourism recovery following the easing of entry restrictions will boost Thailand’s current account balance, enabling swift GDP growth in 2H22. In contrast, US economic growth has peaked and is now slowing. Still, softening US inflation indicators could mean less Federal Reserve hawkishness, prompting US bond yields and the dollar to cool off. Hence, a strengthening baht in the face of a weakening dollar will benefit firms with costs that are exposed to foreign currencies and attract foreign inflows to big-cap stocks. We have compiled lists of the likely beneficiaries of baht appreciation and of stocks likely to be favored by foreign investors.
Thailand’s current account recovery to fortify the baht
The baht has declined 3.3% YTD against the US dollar to its weakest level in five years, as sharply higher oil prices and the absence of tourism brought on a current account slump. But the Thai tourism is now recovering strongly and the worst COVID-19 effects are now behind us. The further easing of restrictions to entry on May 1 triggered a 25% MoM jump in foreign arrivals, May 1-21, to around 360k persons, according to the Tourism Authority of Thailand, and we expect a 40% MoM increase for May as a whole (desire for “revenge travel” has trumped seasonality). Furthermore, tourist arrivals could rise even faster after June 1, when the Thailand Pass scheme is lifted.