nigelforbes

Capital Flows is yet another element of Baht strength and refers to the large scale flow of money in and out of the country, for specific purposes. Capital inflows is money coming into Thailand, from overseas, for investment or speculative purposes. Hot money refers to capital inflows that is chasing yield because interest rates are favourable or because the bond or equities market offer favorable returns. Capital outflows is the opposite of the above. Net capital flows into equities and bonds are frequently reported in the media. Capital flows should not be confused with capital investments which are by their very nature, longer term cash injections by foreign entities, into new or existing business here and are typically approved and monitored by the Bank of Investment (BOI) Generally speaking, the higher the capital inflows, the stronger the economy is forecast to be. Critically, capital inflows must exchange foreign currency for Baht and outflows do the obverse hence the higher the capital inflows, the stronger the Baht is likely to become.

The policyholder, whilst still alive, designates a beneficiary, as with all polices that pay out on life insurance!

The Thai Bond Market is an important element of Baht strength. Prior to the 1997 crash, the Thai government did not issue bonds, which meant that financing depended on banks and customer deposits. It’s reasonable to assume that this was a factor in the country attracting retired Western expats because in the early days this bolstered bank deposits. Corporate bonds were issued but the quality of them was sometimes less than desirable hence there was a need to establish an alternate form of high quality financing. Establishing and growing the bond market has been an important priority of government ever since. The three main types of bonds are: Government Bonds - typically issued to finance annual budget deficits where spending has exceeded the budget. These bonds are regarded as high quality and are in very high demand nationally and overseas because they are considered secure debt. BOT Bonds - issued to finance capital expenses such as new railroads or similar, this is also regarded as secure debt. Corporate Bonds - issued to finance company expansion. A secondary bond market exists to buy and sell bonds. The Thai bond market today has grown substantially since inception and is worth USD 450 bill, about 45% of which is government bonds. Consequently, the bond market, bank lending and equities market have become more balanced and higher quality corporate bonds have grown in quantity and quality. Crucially, about 96% of government borrowings are in Thai Baht, less than 4% are in foreign currency. Government borrowings represent about 60% of GDP, which means financing the interest payments on the bonds is a low overhead, especially since they are in Baht and not subject to exchange rate fluctuations. Foreign currency dealers, banks and the FOREX system understands these things and view the level of government debt as very low by comparison to other countries, a major factor that adds to Baht strength. A link to the Thai Bond Market Association follows, for those wanting to understand this aspect in greater detail. https://www.thaibma.or.th/EN/Education/ThaiBondMarket.aspx

Yes, it is about what you believe. The evidence that you have seen personally, your bike clutch and your brother in laws business, is still anecdotal and not representative of the economy as a whole. The same is true of swings in the value of the baht over short timescales or even worse, intraday swings..... neither mean much at all. Your two observations means there's huge amount you don't see which when factored in, change the answer you would otherwise have arrived at. In opinion polls, surveys of 1,150 people on any given subject is statistically proven to be representative of the views of the population as a whole and most likely to be fact. Trend is also important, in financial markets the 200 day moving average is the most reliable, the 200 day MA will more or less confirm direction, anything less than that is not reliable. Seeing a couple of things a couple of times, doesn't make what you see a factually correct observation that is representative of the entire economy, which is spread over 500,000 square kilometers of Thai countryside! Then there's newspaper articles. I don't know at what point people started to believe that newspapers only report facts and are never wrong. Even worse, that they are more accurate at making financial calculations than the Central Bank and more likely to tell the truth than the horses mouth. Personally, I need to read at least four or five different versions of an important story, from different reliable well known sources, before I am willing to believe anything written in the press. I have come across quite a few people who simply are unwilling to believe any financial figures produced by anyone in Thailand, even BOT, especially not government. Export levels, unemployment, Foreign Currency Reserves levels, inwards FDI, the exchange rate, all the numbers are accused of having been manipulated at various times, nearly always by foreigners. Yet when you ask those people to prove their theories, they can't, at least not with overwhelmingly convincing evidence. I imagine this attitude is just an extension of the fact that corruption does exist here so readers assume if that's the case, it must exist everywhere in everything......that's very peculiar thinking and very unhealthy, I think, I don't believe I could live here if I thought that or felt that way.

"Income earned outside the Thai tax system in prior tax years is not regarded as income ,that could be taxed , rather it it is regarded as now being capital that was earned in the past ie so no longer subject to current year taxation". As wordchild says, the tax year is clearly defined and previous years earnings do not fall within those boundaries.

Policyholder

MB - rather than let this thread be consumed by something neither one of us seems able to prove conclusively to the other, why not let's wait and see what happens by mid year. In the meantime, we can agree to disagree and let the thread move on to other aspects of the Baht.

Yes, it is enshrined in Thai tax law.

I have no agenda, perhaps you need to go back and read through things more slowly. If anyone has an argument that proves the 19 bill was wasted/lost, I'll listen to it, I've given you four reasons why it wasn't. All I've read so far is that it was, because some hack said it was, that's not enough for me.

Bangkok Bangkok Bank,,,,Systemically important is the word I was groping for. ????

What nonsense you speak!

I read an assessment that said Bangkok Bank is of major importance to the country because it is the largest by number of branches and accounts, most of whom are small balance account holders. The continued safety of the bank is vital to maintaining consumer confidence in the Thai banking system and the BOT and that the bank would be protected at all costs. That makes a lot of sense to me.

I don't have a horse in this race, other than to come up with the right answer so let me try and put this issue to rest. USD 19 bill. is around THB 630 bill., that is around a fifth of the annual budget. Given the number of enemies the present government has, if there hadn't been a satisfactory explanation regarding this supposed shortfall, I'm pretty sure the repercussions would have been far greater than they were and at a minimum, people would have been replaced....they weren't. Secondly, the story was only given fleeting coverage in the international financial press, as far as the marklets were concerned this was a non-story. Thirdly, the author of the article in the link provided earlier is not exactly a financial expert. He wrote, "I calculate......". THB I'm not certain he has the knowledge to calculate those differences, especially given that his other pieces of journalism include, coverage of an exhibition on postpartum depression! The author also quoted BOT the following month when they said that: “If you ask if the BoT has gone to intervene in the market, then yes, we have,” Sethaput said but added that “this was being done when the Thai Baht was witnessing a volatility and it was not to change the direction of the deprecating currency because Thailand has learnt its lesson from the 1997 financial crisis by going against the market trend.” For whatever reason, that quote seems to have been "overlooked" by those who appear to cling to an inflatable rubber duck in a Tsunami in the hope that manipulation and fraud can be proven by government. Earlier, I set out four reasons why I didn't believe the shortfall existed, I am happy to be proven wrong and have my opinion changed but that article alone isn't going to do the trick. https://www.thaienquirer.com/44863/bank-of-thailand-expects-thai-economy-to-return-to-pre-pandemic-levels-by-year-end-or-early-2023-but-warns-of-possible-speed-bumps/

Phew! :;) if the ratios remained the same and only the relative value changed, I don't think there would be any effect. It is the rate of growth of GDP that is important, that and the import export ratio.

It depends whether you believe the 19 bill story, I personally don't. And predicting 37 in September was hardly rocket science, not when the Us inflation story and interest rate story was already painted crystal clear.

I don't think everyone understands that the swing between 32 and 38 and back to 32 was solely a function of USD, it had almost nothing to do with THB.

It is not the rate that causes intervention it is the volatility over short timescales. Not is in the business of smoothing peaks and valleys, .not influencing minimum and maximum.

I can only explain it for you, it's up to you what you believe. But be aware that promoting the flat earth concept isn't always well received at cocktail parties.

It was down, so? Anecdotal evidence of your bike clutch is not representative of the economy as a whole. Go look at the export numbers at tradingeconomics.com for the actual numbers. Also, you may not have fully understood how small THB and how little money it takes to change it's value.

Nobody owns THB. The Prawit comment was coincidental timing and an expression of frustration, not a secret signal, dear God!

The answers to your questions are in the thread and in that lengthy first post. In summary, Thailand is an exporting country, over 60% of its GDP comes from exports. Even though covid closed the country, people continued to work, farmers continued to grow crops and they all continued to export their goods. Plus, the government has a low public debt ratio by comparison to other countries, that plus high Foreign Currency Reserves and low social care overhead costs means the baht remined strong. I would urge you to read the opening post for a more complete answer.

Thanks for posting this, I've read it a couple of times but it's difficult reading and I'll need time to go through it again to understand it more fully. In the meantime, here's one take on Thailand's reliance on USD. De-dollarization of Thailand’s trade is extremely complicated but it is already under way. The RCEP (regional Comprehensive Economic Partnership) program, which is a regional trade group comprising SE Asian nations plus China, Japan, Australia and Korea is an important part of this because it involves countries that are vying to establish an alternate trading currency, China and Japan. The RCEP group of countries will account for 30% of global trade which makes it hugely influential. “Booming foreign trade has also been reported in some other member countries. Thailand's trade with RCEP member countries, which accounts for around 60 percent of its total foreign trade, rose 10.1 percent year on year to 252.73 billion U.S. dollars in the first nine months of 2022”. https://www.aseanbriefing.com/news/how-will-the-rcep-impact-thailands-economy/ Currency swaps between China and Thailand are another part of the RCEP picture. A 5 year bi-lateral Currency Swap Arrangement (BSA) exists valued at RMB 70 bill. and THB 370 bill which avoids the need for cross border payments in USD. There’s an excellent paper on this subject linked below which I highly recommend: https://www.econstor.eu/bitstream/10419/261216/1/E2021-23.pdf The first question is, why is dedollarization desirable and why are so many countries actively seeking alternate payment currencies? The major answer is that USD is extremely volatile and plays havoc with regional economies, an urgent need exists to adopt a trading currency that is stable and reliable, a combination of China and Japan have the potential to offer that. Thailand relies on USD exists in two main areas, the importation of oil and trade with its largest trading partner (14%), the US, neither of which are likely to change in the foreseeable future, although given time they almost certainly will. The shift away from fossil fuels will provide an alternative to oil consumption and USD payments for it, as will the rise of China as Thailand’s primary trading partner. A natural extension to an alternate trading currency might be an impact on the FOREX and the way in which currencies like the Baht are measured. If the concept of alternatives to USD aren’t complicated enough, the idea of revising the FOREX stretches even the most flexible imagination! But that is something that must happen at some point, the Reserve Currency has to be based on something tangible or on a basket of stable currencies, if it is not, values become meaningless because of debt and the undue leverage the US can bring to bear on competitors.

In a not round about way, customers remit whatever currency they chose, to an overseas destination of their choice but pay for the service in Baht in Thailand. I do get it, but it's a wording and marketing issue which leaves things unclear to customers who think they are actually sending THB overseas.

I don't believe BOT has changed the currency exchange rules so THB cannot be remitted overseas. My guess is that somebody in the partnership is going to do the exchange into the destination currency. https://www.bot.or.th/English/FinancialMarkets/ForeignExchangeRegulations/FXRegulation/Pages/default.aspx

AOT tracks the number of aircraft movements, inbound and outbound, domestic and international. https://www.airportthai.co.th/en/airports-of-thailand-plc/about-aot/air-transport-statistic/