Weakening dollar will make Thai investments attractive next year, predicts expert

By Wichit Chaitrong
The Nation

 

Tak Bunnag, head of Krungsri Bank’s Global Markets Group

 

Next year, the Thai baht, stocks and bonds will be attractive for foreign investors because the US dollar is on a weakening trend, Tak Bunnag, chief of Krungsri Bank’s Global Markets Group, said on Tuesday.

 

The baht is expected to remain strong next year, moving up toward Bt29 against the dollar from the current rate of Bt30, he said. 

 

Krungsri predicts that the baht will appreciate to Bt29.75 to the dollar in the second quarter of next year, and then up to Bt29.25 in the fourth quarter. 

 

The key reason for the weakening of the US dollar is that the Federal Reserve is expected to maintain its low-interest rate policy.  

The US has also been facing deficits in its budget and current account, contributing to a weaker dollar. The International Monetary Fund has projected that the US government will run a large budget deficit equivalent to 18.7 per cent of the GDP and a current account deficit at 2.1 per cent of the GDP this year. 

 

The baht was the strongest currency in the region last year, soaring 8.6 per cent before falling 8.63 per cent in the first quarter this year, the second weakest compared to the Indonesian rupiah, which fell 14.98 per cent.

 

However, in the fourth quarter of this year, as of November 24, the baht rose 4.12 per cent, second only to the Indonesian rupiah, which jumped 4.91 per cent. 

 

Apart from the currency, Thailand’s stock market has also been highly volatile this year. Thai stocks plunged in March when foreign investors made a net sell of about Bt80 billion due to panic over Covid-19.   

 

Foreign investors returned to the Thai stock market in November following news of a breakthrough in Covid-19 vaccines and Joe Biden’s win of the US presidency. Though foreign investors dumped Thai government bonds in March, they returned later in the year and purchased more in November. 

 

“In the first half of the year, investors were risk-off, but now they are risk-on,” said Tak, referring to investors’ appetite for exposure to risks.

 

In the first 11 months of 2020, foreign investors made a net sell of Thai stocks and bonds worth Bt260 billion and Bt48 billion, respectively.

 

Krungsri Research forecast that Thailand would have a current account surplus worth US$18.8 billion (Bt569 billion) next year, which is considered large even though it is lower than the surplus of $20.3 billion projected for this year. 

 

“The years of current account surplus [close to $40 billion in 2019] is making the baht stronger as capital inflow is larger than outflow,” Tak said. 

 

Thai bonds are also promising for investors as low inflation supports investment returns, given the low policy interest rate of 0.5 per cent, he said. 

 

Yields of 10-year bonds issued by the government is expected to be 1.1 per cent by the end of next year, up from 0.829 per cent at present. However, he said, US government bond yields are expected to be 1.55 per cent by the end of next year, up from 1.412 per cent currently. 

 

Tak forecast that the Bank of Thailand’s Monetary Policy Committee will leave the policy rate unchanged at 0.5 per cent next year.

 

He also believes that the Biden administration will ease the degree of trade protectionism to some extent, which will lessen the pressure on regional currencies, especially the Chinese yuan. 

 

In the first 11 months, the yuan rose 6 per cent against the dollar, which is unusual, Tak said. 

 

China’s economic growth has almost returned to pre-Covid level despite the appreciation of the yuan, so Thailand should learn from China and restructure industries to boost its competitiveness in the export market, Tak said. 

 

Krungsri Research has forecast 3.3 per cent growth for Thailand next year, up from the projection of 6.4 per cent contraction this year. Exports, a major growth engine, are expected to expand 4.5 per cent up from the projected 7.5 per cent contraction this year.

 

Tourist arrivals, however, will only be about 4 million next year, down from 6.7 million this year and 39.7 million last year. “We are worried about slow recovery in the tourism sector,” Tak said.

 

Source: https://www.nationthailand.com/business/30398910

 

-- © Copyright The Nation Thailand 2020-12-02

 

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8 minutes ago, webfact said:

Next year, the Thai baht, stocks and bonds will be attractive for foreign investors because the US dollar is on a weakening trend

 

Krungsri predicts that the baht will appreciate to Bt29.75 to the dollar in the second quarter of next year

Yeah, I can see the logic of buying less for your money,

 

Guess we can start a drive for our american friends now 

Edited December 1, 20205 yr by RichardColeman

The weakening dollar means you can buy more and get more.    Buy low, sell high?   This article is nothing more than a guy trying to sell a so so used car.  The fast growing economy in the region is Vietnam.   Savings accounts are over 6%.  

5 hours ago, webfact said:

Next year, the Thai baht, stocks and bonds will be attractive for foreign investors because the US dollar is on a weakening trend, Tak Bunnag, chief of Krungsri Bank’s Global Markets Group, said on Tuesday.

Wednesday will be a different speech

The weakening dollar--say it with a smile.  Now you have the most expensive rice in the area--if not the planet.

7 hours ago, webfact said:

“In the first half of the year, investors were risk-off, but now they are risk-on,” said Tak, referring to investors’ appetite for exposure to risks.

so they will also be taking a drive around the country?

or perhaps drinking to water or breathing the air? 

It's all imaginative charts and crystal balls.

50 minutes ago, J Town said:

It's all imaginative charts and crystal balls.

Sound reasonably accurate to me.

7 hours ago, yellowboat said:

The fast growing economy in the region is Vietnam.   Savings accounts are over 6%.  

Correct.  

 

How good would your 800,000 baht look sitting in a bank in Vietnam, earning 6%, with a lower cost of living.  

43 minutes ago, Leaver said:

Correct.  

 

How good would your 800,000 baht look sitting in a bank in Vietnam, earning 6%, with a lower cost of living.  

Before the virus, you could find 7.9% on savings at some banks.  Fixed deposit should be higher.   The current Thai government must think Thailand is beyond compare with its neighbors, or they think farangs dumb struck with love.  Socially, Thailand is great, but for work it is way behind almost all of Asia.    

1 hour ago, yellowboat said:

The current Thai government must think Thailand is beyond compare with its neighbors, or they think farangs dumb struck with love. 

I've met a couple of western guys that moved from Thailand to Vietnam with their Thai wives.  One of the couples have a cafe there.  

 

The writing is on the wall for the future for expats who are on a fixed pension which is not providing a decent quality of lifestyle in their retirement.