SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 17 October 2016ContactsIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li 212-553-1404Senior Research Analyst xian.li@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Sovereign Risk ReportLoss of a Revered King Sparks Rise in Thailand Sovereign Credit Risk Market-based measures of sovereign credit risk for Thailand, Southeast Asias second largest economy, have been largely muted since July 2015 as the governments fiscal position has shown signs of improvement. Over that period, Thailands five-year Sovereign EDF measure has averaged 0.17%. The countrys economy grew an at annual rate of 3.5 percent in the second quarter 2016, its fastest pace in more than three years, helped by strong tourism and government spending. However, the countrys sovereign credit risk increased dramatically over the past week as concerns over the well-being of Thailands King Bhumibol Adulyadej began to rise. The countrys five-year Sovereign EDFTM (Expected Default Frequency)1 measure, rose from 0.17% on October 7 to 0.23% as of October 12, the largest increase among the 70 sovereign entities that we track. On the following day the worlds longest-reigning monarch died. The countrys Sovereign EDF measure continued to worsen, reaching 0.29% as of October 14. As shown in Exhibit 1, even with the recovering trend in Thailands five-year Sovereign EDF measure since the beginning of the year, at 0.29% it exhibits one of the highest credit risks in the Asia-Pacific region, after Indonesias 0.48%, Vietnams 0.43% and Malaysias 0.34%.Thailand has a long history of political turmoil, including violent street protests and the military coups. Last week, Prayuth Chan-Ocha, the junta leader, confirmed that crown prince Maha Vajiralongkorn would step into his fathers position. Fears over how Thailand will ...
