Risk of debt default likely in Thailand

A group of anti-government protesters entered GSB, the Bangkok government bank, to prevent staff from working – holding discussions with bank representatives for half an hour on Monday January 20. About 20 city roads have been closed or partially closed by anti-government protesters’ Bangkok shutdown operation which is now in its 9^th day. Protesters continue approaching and entering state government agencies to force government officials to stop working. The protestors at the bank were against the government’s rice-pledging scheme.They were not trying to prevent farmers from receiving payment for their pledged rice, but were calling for the government to borrow the money from commercial banks and financial institutions rather than taking the money from the state-owned Government Savings Bank (GSB).

Thailand’s risk of a debt default is the highest since June 2012 as anti-government protesters prompt money managers to sell the nation’s assets. Foreign investors have pulled more than USD$4 billion from Thai stocks and bonds since October 31, 2013, as protest rallies blocked Bangkok roads attempting to force a government shutdown.

The baht has slumped due to bets that the central bank will cut borrowing costs this week as Bangkok’s protest turmoil prevents government growth and increases speculation of a coup. There is no fiscal support as politics are in chaos, said a money manager from Tokyo. Credit default swaps insuring Thai debt against non-payment for five years rose to 158 on January 20 in Singapore, and 150 on January 17 in New York. Investment advisers say it is the highest close since June 2012.

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