Offshore Rates

[jrmaaanda]

I am thoroughly confused by the big discrepancy between onshore and offshore rates for the baht. Can someone enlighten me as to how it works in practice?

I have about 30 million baht currently invested in the Thai stock market, which I am gradually disinvesting and intending to convert to pounds or euros. For pounds, the onshore rate is about 69 and the offshore rate about 65, so can I somehow sell my baht at the offshore rate and thereby get an extra £26000? Has anyone managed this? Any details of the procedure would be extremely welcome.

If I cannot, then who does get to sell baht at the offshore rate, if it is not practically a fiction?

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

[Naam]

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

you answered your question. it can't be done.

[jrmaaanda]

Then at what point would the following procedure not work?

1. Open both baht and sterling accounts in a bank in London (I have had such a thing before)

2. Transfer money to the baht account in baht from my broker in Thailand.

3. Ask the bank to exchange the baht into sterling, presumably at the offshore rate, since London is offshore.

4. Ask the bank to wire the sterling to my broker in Thailand.??

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

you answered your question. it can't be done.

[Naam]

Then at what point would the following procedure not work?

1. Open both baht and sterling accounts in a bank in London (I have had such a thing before)

2. Transfer money to the baht account in baht from my broker in Thailand.

3. Ask the bank to exchange the baht into sterling, presumably at the offshore rate, since London is offshore.

4. Ask the bank to wire the sterling to my broker in Thailand.??

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

you answered your question. it can't be done.

Baht will be exchanged already in Thailand at onshore rate and transfer is in GBP. unfortunately no way to transfer THB to an offshore THB account otherwise everybody would do it.

[edwinchester]

If you've got connections or are an ex-pm, fill a suitcase with Baht, nip down to Singapore and exchange there.

If your not connected, do the same, just don't get caught. You'll lose all your money.

[DFCarlson]

Then at what point would the following procedure not work?

1. Open both baht and sterling accounts in a bank in London (I have had such a thing before)

2. Transfer money to the baht account in baht from my broker in Thailand.

3. Ask the bank to exchange the baht into sterling, presumably at the offshore rate, since London is offshore.

4. Ask the bank to wire the sterling to my broker in Thailand.??

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

you answered your question. it can't be done.

Baht will be exchanged already in Thailand at onshore rate and transfer is in GBP. unfortunately no way to transfer THB to an offshore THB account otherwise everybody would do it.

What are the specific reasons preventing one from transferring THB to an offshore account where it can be converted to another currency at the offshore rates? I transfer dollars to my Thai THB account and the conversion to THB from dollars is made at the onshore rate after the dollars arrive at the Thai bank.

[Naam]

Then at what point would the following procedure not work?

1. Open both baht and sterling accounts in a bank in London (I have had such a thing before)

2. Transfer money to the baht account in baht from my broker in Thailand.

3. Ask the bank to exchange the baht into sterling, presumably at the offshore rate, since London is offshore.

4. Ask the bank to wire the sterling to my broker in Thailand.??

On the other hand, if it can be done, then what is to stop anyone sending the money back to Thailand as pounds and reconverting it here at the onshore rate, thus making a handsome and endlessly repeatable profit?

you answered your question. it can't be done.

Baht will be exchanged already in Thailand at onshore rate and transfer is in GBP. unfortunately no way to transfer THB to an offshore THB account otherwise everybody would do it.

What are the specific reasons preventing one from transferring THB to an offshore account where it can be converted to another currency at the offshore rates? I transfer dollars to my Thai THB account and the conversion to THB from dollars is made at the onshore rate after the dollars arrive at the Thai bank.

the specific reasons are the many years old and the new several months old prevailing currency restrictions. without these restrictions the existence of dual on/offshore rates would enable each and everybody to profit from mere back-and-forth transfers.

[chiang mai]

If you do a search in this forum you will see a recent and lengthy debate on this subject. Issues that dominate are:

1) the amount of currency, native and foreign that individuals can export from Thailand - restricted to USD20,000 equivalent,

2) FX margins on Thai Baht in the UK and Europe make any exchange at UK banks a loss leader.

[jrmaaanda]

If you do a search in this forum you will see a recent and lengthy debate on this subject. Issues that dominate are:

1) the amount of currency, native and foreign that individuals can export from Thailand - restricted to USD20,000 equivalent,

2) FX margins on Thai Baht in the UK and Europe make any exchange at UK banks a loss leader.

If these were the only objections, then:

1) In this case, the money in question was directly invested in the Thai stock market well before last December, and therefore exempt from export imitations. Even if that were not so, can a Thai citizen not take out more than the USD 20,000?

2) It at least was the case that for sums over £ 25,000 some British banks had a difference between their baht buying and selling rates of only about 1 1/2 per cent. If it has become much more expensive, then why couldn't one have recourse to doing the exchange in a third country (eg. Singapore) with reasonable rates and no exchange controls?

[jrmaaanda]

Since my original posting, my stock broker in Bangkok has written to me:

We have checked with BBL, the bank informed us that you can transfer money

in Thai Baht to your representative bank in your country. This means that

your received bank must have non-resident Baht account and can receive Thai

Baht. Please check with your representative bank for Thai Baht receiving.

Meanwhile, the withdraw amount which is less than Baht 1 million, is not

necessary to receive the approval from the Bank of Thailand. But the

higher withdrawal amount needs the approval from the BoT which will take

time for approval (it may be around a few weeks).

Required documents for money transfer less than Baht 1 million are as

follows:

1. selling record worth Baht 1 million or higher (prepared by BLS).

2. updated copy of your passport with your signature for true

certified.

3. bank charge Baht 400 + commission in lieu 0.25% of transferred

amount (minimum Baht 300)

ex: withdrawal amount Baht 1 million

bank charge 400 Bt + commission lieu (0.25% * 999,600 =

2,499 Bt)

total amount is Baht 2,899

4. the above expenses in (3) do not include the expenses from your

representative banks.

In the light of that, please could anyone who has kindly replied to my first post please explain in more detail why it would be impossible?

[JacksonGlurk]

Even if you found a way to move baht into an offshore account, believe-it-or-not you almost certainly could not sell it at the so-called offshore rate.

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

And each time I questioned the rate and pointed to the Reuters wire which carried an offshore rate neary 10% better than the domestic rate they were offerring, I got the same answer: the so-called offshore rate is for interbank transaction only and doesn't apply to transactions by individuals. Yes, I know that doesn't make any sense at all, but a total of four major banks gave me exactly the same answer. After that, I gave up.

[Naam]

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

whom are you trying to bullshit my friend?

[Naam]

[/i]In the light of that, please could anyone who has kindly replied to my first post please explain in more detail why it would be impossible?

please inform us when you have transferred successfully THB from Thailand to a THB offshore account without prior conversion and those of us who consider it impossible will hang our head in shame.

[JacksonGlurk]

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

whom are you trying to bullshit my friend?

What an arrogant jerk you are.....

I was trying to help the previous poster, and frankly I don't give a stuff what you think. I'm not selling anything and I'm not buying anything. I offered him some information in passing and you feel the need for some totally unknown reason to jump in and call me a liar. It's people like you that make what otherwise would be a casual exchange of observations so unpleasant.

Get stuffed, you idiot.

Edited May 9, 2007 by JacksonGlurk

[Naam]

frankly I don't give a stuff what you think. I'm not selling anything..

you are trying to bullshit fellow tv-members and that has to be pointed out! no such thing like 8% interest on THB exists and no such thing like onshore exchange rates applied by offshore bank.

i might be an idiot in your eyes but have in my left pinky toe more financial knowledge than you will ever possess in your whole life.

[sonicdragon]

I'd like to respond to this in detail but I don't have much time at the moment.

As is normal in Thailand, the rules and regulataions are murky enough so that a clear exposition of the situation is hard, but basically, I believe that the OPs scheme will fail for one or more of the follow reasons:

Onshore banks are restricted from selling baht to offshore banks, which is part of the reason for the existence of the onshore/offshore rate divergence, and this includes domestic banks selling baht to their overseas branches - a funds transfer from a client account might fall into that catagory.

If the funds transfer is possible, it could be earmarked as "onshore funds" by the overseas bank since the funds originated onshore. This might prevent the transfer of those funds to another bank, and if exchange were requested by the overseas bank it might only be possible to do it at the onshore rate.

As already mentioned it is hard to make a definitive judgement with the way the rules are regulations are implemented, but it should be considered along with the simple fact that if it were possible, then some of the cleverest people in the world would be doing it en masse and the rate divergence would be arbitraged away instantly.

[sonicdragon]

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

What bank is giving 8% on THB deposits overseas ? AFAIK you are hard pressed to find any currency yielding that rate of interest for bank deposits ! Please do enlighten us......

[Edonista]

frankly I don't give a stuff what you think. I'm not selling anything..

you are trying to bullshit fellow tv-members and that has to be pointed out! no such thing like 8% interest on THB exists and no such thing like onshore exchange rates applied by offshore bank.

i might be an idiot in your eyes but have in my left pinky toe more financial knowledge than you will ever possess in your whole life.

Really I have heard that after 19.12.2006 (introduction of 30% deposit) rates on off-shore THB went up a lot because of lack of liquidity. That might explain the "average 8% rate".

[Edonista]

[/i]In the light of that, please could anyone who has kindly replied to my first post please explain in more detail why it would be impossible?

please inform us when you have transferred successfully THB from Thailand to a THB offshore account without prior conversion and those of us who consider it impossible will hang our head in shame.

I please too ! I still have 6 million baht in this country and I would really like to get a 6% better exchange rate when I move to Philippines or some other place....

[sonicdragon]

frankly I don't give a stuff what you think. I'm not selling anything..

you are trying to bullshit fellow tv-members and that has to be pointed out! no such thing like 8% interest on THB exists and no such thing like onshore exchange rates applied by offshore bank.

i might be an idiot in your eyes but have in my left pinky toe more financial knowledge than you will ever possess in your whole life.

Really I have heard that after 19.12.2006 (introduction of 30% deposit) rates on off-shore THB went up a lot because of lack of liquidity. That might explain the "average 8% rate".

Umm, where did you hear that ? It'a new one on me ! Can you elaborate on why banks would offer such a rate for liquidity reasons ? And anyway JacksonGlurk says that he "purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%" , so the offshore situation wouldn't explain it anyway.

[Naam]

frankly I don't give a stuff what you think. I'm not selling anything..

you are trying to bullshit fellow tv-members and that has to be pointed out! no such thing like 8% interest on THB exists and no such thing like onshore exchange rates applied by offshore bank.

i might be an idiot in your eyes but have in my left pinky toe more financial knowledge than you will ever possess in your whole life.

Really I have heard that after 19.12.2006 (introduction of 30% deposit) rates on off-shore THB went up a lot because of lack of liquidity. That might explain the "average 8% rate".

i am not sure when i sold my offshore Baht, it must have been end of february or beginning of march. bought them in august, collected a meagre average rate of 4.35% p.a. but made a nice profit on the exchange rate.

today's exchange rate @16.30 hrs UBS, Singapore THB/USD bid 32.44 / ask 32.64

one month deposit 3.625% p.a. for amounts of 5 million and above, for 2-5 million 3.375%

what went up offshore after the restrictions was the exchange rate. THB interest rates offshore were lowered twice this year, more or less in line with BOT rate cuts.

[Naam]

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

What bank is giving 8% on THB deposits overseas ? AFAIK you are hard pressed to find any currency yielding that rate of interest for bank deposits ! Please do enlighten us......

well a few do exist Dragon. i'm in TRY, ISK, BRL and MXN all of which pay >8% and also show considerable gains vs. USD during the last ten months.

and... of course there is the Zimbabwe Dollar; presently with a rate of 138% PER MONTH

edited for addendum:

forgot to mention IDR and PHP, both ~10% p.a. MINUS TAXES

Edited May 9, 2007 by Dr. Naam

[sonicdragon]

I purchased about twenty million baht offshore nearly a year ago and have been holding it there ever since, rolling it over in monthly time deposit. The interest rate has averaged about 8%, which is attractive for holding cash in any currency. Anyway, for various reasons, I recently decided to sell the THB position and was surprised when I was quoted the Thai domestic sell rate. I tried three other major banks, two in the US and one in the UK. Same deal.

What bank is giving 8% on THB deposits overseas ? AFAIK you are hard pressed to find any currency yielding that rate of interest for bank deposits ! Please do enlighten us......

well a few do exist Dragon. i'm in TRY, ISK, BRL and MXN all of which pay >8% and also show considerable gains vs. USD during the last ten months.

and... of course there is the Zimbabwe Dollar; presently with a rate of 138% PER MONTH

edited for addendum:

forgot to mention IDR and PHP, both ~10% p.a. MINUS TAXES

I'm a bit behind the times on currencies these days. I thought there might be some but I was hard pressed to name any (other than basket cases) off the top of my head.

[jrmaaanda]

From what most of you are saying, I believe my hopes of changing my money at the offshore rate are rather dim. On the other hand, I have now definitely confirmed with Siam Commercial Bank that an additional sum of 14 million baht I imported to my account with them could be returned to London as baht, if I had a baht account there, ie. the same story as the money with my stockbroker, so as the amount to be gained if I could change it in London would be , for me, gigantic, I could not forgive myself if I did not at least confirm it is impossible. SCB did warn me they had no idea if I would be able to find a bank in London willing to change the money, so this is very likely to do with what Sonic Dragon said. Can anyone give me any recommendations as to who I should ask in London to get a clear answer?

[sonicdragon]

From what most of you are saying, I believe my hopes of changing my money at the offshore rate are rather dim. On the other hand, I have now definitely confirmed with Siam Commercial Bank that an additional sum of 14 million baht I imported to my account with them could be returned to London as baht, if I had a baht account there, ie. the same story as the money with my stockbroker, so as the amount to be gained if I could change it in London would be , for me, gigantic, I could not forgive myself if I did not at least confirm it is impossible. SCB did warn me they had no idea if I would be able to find a bank in London willing to change the money, so this is very likely to do with what Sonic Dragon said. Can anyone give me any recommendations as to who I should ask in London to get a clear answer?

I might be wrong but I imagine that most of the high street banks will not offer a baht account. You could try a London branch of a Thai bank (Bangkok Bank has one) or one of the US banks like Citibank - I'm fairly sure they do (I have a baht account with Citibank Hong Kong.