Asia Plus Securities (ASPS) noted that the baht’s 3.26% month-to-date gain appears "disproportionate to some underlying fundamentals", reports the Bangkok Post.
Over the period, the dollar index weakened by only 1.20%, while foreign investors recorded net outflows of more than B15 billion from the Thai bond market, even as equity inflows gradually returned.
The baht also outperformed regional peers by a wide margin, emerging as the strongest currency in Asia. By comparison, the Malaysian ringgit, the second-best regional performer, has strengthened by just 1.14% month-to-date, said the brokerage.
"Foreign investors allocating funds to Thai equities are currently benefiting from a dual gain, comprising both equity market performance and currency appreciation," said Paradorn Tiaranapramote, first vice-president of research at ASPS.
When converting returns back into dollars, investors are earning roughly 4.2% month-to-date, even though the Stock Exchange of Thailand (SET) has risen by only 1%.
This highlights the importance of monitoring currency movements when investing in both Thai and US equity markets, he said.
ASPS recommends focusing on stocks that benefit directly from a stronger baht, particularly companies with significant foreign-currency debts, as debt servicing costs decline when the baht appreciates. These include power generation, airlines, and import-oriented companies with lower raw material costs.
The brokerage also sees potential fund-flow beneficiaries among large-capitalisation stocks that tend to attract foreign investors during periods of baht strength, such as Kasikornbank (KBANK), SCB X (SCB), Siam Cement (SCC), CP All and Advanced Info Service (ADVANC).
Conversely, a stronger baht poses challenges for export-oriented companies, as currency appreciation reduces export competitiveness. Stocks under pressure include companies in the electronics sector and food exporters.
Companies in the tourism sector may also be affected by a strong baht, such as Airports of Thailand, Minor International, Central Plaza Hotel, and The Erawan Group. Hospital stocks with high exposure to foreign patients could face currency headwinds, notably Bumrungrad Hospital, Bangkok Dusit Medical Services, and Praram 9 Hospital.