The Thai capital market is drawing offshore fund flows, likely from the European Central Bank's massive money-pumping scheme, with capital inflows being detected in short-term bonds, the Thailand Futures Exchange (TFEX), and equity.
Foreign investors scooped up short-term Thai bonds worth a combined 19.6 billion baht between April 1 and 10, though their buy-sell position in the debt market swung back and forth earlier, said Visit Ongpipattanakul, managing director at Trinity Securities Group.
Investors are hungry for high-yield bonds in emerging markets, says Mr Visit. Phrakrit Juntawong
"Investors are hungry for high-yield bonds in emerging markets. The real yield of Thailand's bonds after deducting inflation at 2.2% is among Asean's three highest," he said.
Speculation of a further policy rate cut by the central bank in April or June has prompted foreign investors to pour their investments into the bond market, said Mr Visit.
Typically, bond prices in the secondary market rise when the policy rate is cut as they yield more than new bonds.
In March the Monetary Policy Committee unexpectedly slashed the one-day repurchase rate by a quarter percentage point to 1.75%.
The European Central Bank and the national central banks of the euro-zone bloc started buying bonds in early March as part of a 1.1-trillion-euro quantitative easing programme to stimulate growth and ward off deflation across the region.
He said liquidity also flowed into equity and derivatives.
Foreign investors bought 3.80 billion baht more than they sold on the TFEX from March to April, compared with their net sell of 4.30 billion in January and 6.90 billion in February.
Mr Visit said their net long position was at 30,667 contracts in the TFEX over the past couple of weeks.
"This large net long position held by foreign investors implies they don't intend to sell Thai shares soon," he said.
Mr Visit said foreigners comprise 32% of those holding stock in the Thai market, down from 35% two years ago.
"A potential foreigner buying spree would push up the SET index and strengthen the baht," he said.
Foreign investors are trying to predict the US Federal Reserve's rate decision in June, Mr Visit said. If the policy rate is unchanged, offshore fund inflows are expected in the Thai stock market in the third quarter.
"When foreign investors return, it will be a good time to snap up large-cap shares with a high yield. They will be hungry for a high return," he said.
The market speculated that the Fed will start normalising its rate in September or later because of the uneven recovery in some economic indicators.
