Bank of Thailand introduces measures to mitigate non-resident short-term speculation

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Bank of Thailand introduces measures to mitigate non-resident short-term speculation

By The Nation

 

 

The Bank of Thailand (BOT) has decided to enhance measures to mitigate impact of short-term speculative flows and increase the reporting requirements for non-residents’ holdings of debt securities, BOT’s Assistant Governor for Financial Markets Operations Group Vachira Arromdee said on Friday.

 

The details of the measures are as follows.

 

1) Enhance “Measures to Prevent Thai Baht Speculation” by reducing the limit on the outstanding balance of Non-resident Baht Account (NRBA) and Non-resident Baht Account for Securities (NRBS) from Bt300 million per non-resident to Bt200 million per non-resident with effect from July 22. For NRBA and/or NRBS with outstanding balances at the end of the day higher than Bt200 million per non-resident, financial institutions are required to notify the corresponding non-resident account holders to comply with these changes by reducing the outstanding balances within the effective date.

 

NRBA holders who are non-financial corporates with underlying trade and investment in Thailand, and have opened accounts directly with Thai financial institutions, may submit requests to the BOT for waivers of this outstanding balance limit, which will be considered on a case-by-case basis.

 

2) Enhance the reporting requirements for non-residents’ holdings of debt securities issued in Thailand where the names of end beneficiaries shall be reported for all non-residents’ holdings of Thai debt securities. This measure will help enhance the BOT’s surveillance of non-residents’ investment behaviours and will come into effect as of the July 2019 reporting period.

 

The BOT will continue to closely monitor the Thai baht movements as well as non-resident behaviours, and stand ready to use additional measures if undesirable speculative behaviours persist.

 

Vachira added that the measures address the heightened volatility in global financial market due to various factors, such as trade tensions between the US and major trading partners, the global economic slowdown, and the shift towards a more accommodative monetary policy stance amongst major central banks. These developments have increasingly led capital flows to return to Emerging Market Economies. 

 

With a relatively more positive outlook on the Thai baht, investors have increased their positions in Thai baht and Thai securities, in part for short-term speculative purposes.

 

The Bank of Thailand (BOT) has been closely monitoring the Thai baht as well as non-residents’ capital flow movements, and is concerned about the rapid appreciation of the Thai baht relative to its regional peers, as it could lead to unfavorable macroeconomic repercussions.

 

Source: https://www.nationthailand.com/business/30372861

 

-- © Copyright The Nation Thailand 2019-07-12

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[pokerface1]

Looks like emerging markets like Thailand are going to be awash will capital inflows even though they are trying to mitigate speculators from Skimming off the cream. Thai Baht is going to become even more bullish as other countries suffer from a slowing global economy. 

[Isaan sailor]

We’ll see how well this works.  And if it doesn’t, what next from BoT?

Methinks they’re too cozy with Chinese hot money inflows.

[Antonymous]

Dammit and I've only just deposited my 300 million baht. What am I going to do with the 100 million now that I have to comply with the new law and take it out? First it was that 800,000 in a Thai bank and now this. I'm leaving.

Edited July 12, 2019 by Antonymous

[phkauf]

Sorry but the horse left the barn on this a long time ago. The BoT kept interest rates too high for too long, which encouraged this speculation and now they want to end it. But it is like trying to let air out of a balloon, must be done very carefully or else the balloon just flies away.

Given the ineptitude of the BoT, I don't see this ending well. 

BTW, this is the easiest slam dunk trade in the world - borrow Yen at near zero, invest in Baht at 1.75%, hedge out your currency risk and collect the difference.

[pokerface1]

21 hours ago, phkauf said:

BTW, this is the easiest slam dunk trade in the world - borrow Yen at near zero, invest in Baht at 1.75%, hedge out your currency risk and collect the difference.

I wish it was that simple I don't think you can just transfer large sums of foreign funds into you Thai bank account without it being for say a business investment or to buy condos. Etc. If you have a fx broker you could do a carry trade to collect the interest rate difference. You would also collect profit from the Bahts appreciation. Win win.