Close Monitoring Of Foreign Capital Inflow Needed: Bot

[george]

Close monitoring of foreign capital inflow needed: BoT

BANGKOK: -- The Bank of Thailand (BoT) must closely monitor the influx of foreign capital following the United States Federal Reserve's decision to further cut key interest rates, according to a senior bank official.

Titanun Mallikamas, director of the central bank's Domestic Economy Department, said the overall financial conditions remained volatile following the Fed's latest move to further reduce its fund and discount rates by 50 basis points.

He said the BoT's Monetary Policy Committee will meet February 27 to revise its interest policy after the US central bank had made a sharp interest rate cut.

The committee needed to closely monitor how much the foreign capital would flow into Thailand now that its policy interest rate is 0.25 per cent higher than that of the US.

Actually, he said, the foreign capital inflow direction depended on whether the MPC further reduces the policy interest rate at its meeting.

Mr. Titanun said that the baht's appreciation to a 10-year high again of 33.01 to the US dollar resulted from the capital inflow, strong economic fundamentals, and Thailand's current account surplus.

At the same time, investor confidence has been restored with the formation of a newly-elected government.

He said a proposed end to the 30 per cent reserve requirement imposed by the BoT in late 2006 needed to be considered most carefully.

--TNA 2008-02-01

[TAWP]

RUN FOR THE HILLS! THE MONEY IS COMING!

[0Mix1up]

Yeah don't let foreign money in it will ruin 'our' economy.

[Jai Dee]

CEBF Director suggests BoT to consider whether interest rate cut appropriate

Director of the Center for Economic and Business Forecasting (CEBF), Thanawan Polwichai (ธนวรรธน์ พลวิชัย), suggests that the Bank of Thailand (BoT) and the Monetary Policy Committee should consider whether it is necessary to reduce the interest rate following another FED’s 0.5% interest rate cut.

Mr Thanawan also expresses his confidence that BoT will have effective measures to prevent fluctuation of foreign capital and the baht appreciation.

BoT and the Monetary Policy Committee will call a meeting on February 27 to discuss the country’s economic situation.

The director adds that the appreciation of the baht will not affect the export sector as the currency has not strengthened sharply and the entrepreneurs can adjust themselves in line with the direction of the baht.

Source: Thai National News Bureau Public Relations Department - 01 February 2008

[BigSnake]

Euros or Dollars, I wonder!! Bring it on mine is almost gone maybe some will flow my way.

[matter]

Has the introduction of the '30% reserve requirement' resulted in a significant loss of foreign capital movement into Thailand, or has it achieved its aim of preventing currency speculation destabilising the baht?

[Martin]

I continue to think that the 30% withhold was an excellent move to stop speculation in the Thai baht.

Also, I cannot see that, in present conditions, there is any sense in encouraging foreign capital to flow in.

About the only destination for it would be property speculation, and Thailand can well do without another unsustainable property boom, thank you.

[chownah]

investor confidence has been restored with the formation of a newly-elected government.

It's good to hear that investors have confidence in the newly-elected government....I guess they must not be listening to the wisdom being posted here by so many well informed long standing ThaiVisa members.

Chownah

[xbusman]

I have always found in my experience it was a lot easier to make decisions (including investments) knowing less than more. The more I know about things the far more concerned I am.

I had a lovely conversation a few years back with the leading corrosion engineering expert in the US. After ten minutes, I can hardly drive over any bridge older than ten years. I thought of him after that recent bridge collapse in the US.

Ignorance is a good foundation for bravery Chownah.

[Jai Dee]

Democrat voices support for withdrawal of 30% reserve requirement

Deputy Secretary-General of the Democrat party and member of the party’s economic team, Korn Chatikavanij (กรณ์ จาติกวณิช), says he is concerned over the country’s economy in both macro and micro levels, adding that the party voices support for the withdrawal of the Bank of Thailand’s 30% capital reserve requirement.

Mr Korn adds that the party does not believe in the new government’s populist policies and suggests that the government should have other policies to stimulate the economy.

The deputy secretary-general says further that the baht is likely to appreciate more and the lift of the 30% capital reserve requirement will be good for the investment atmosphere.

As for the People Power party’s secretary-general’s appointment as finance minister, Mr Korn says the secretary-general is qualified to take up the post but the Democrat party will monitor his work.

Source: Thai National News Bureau Public Relations Department - 04 February 2008

[Plus]

investor confidence has been restored with the formation of a newly-elected government.

It's good to hear that investors have confidence in the newly-elected government....I guess they must not be listening to the wisdom being posted here by so many well informed long standing ThaiVisa members.

Chownah

The government hasn't been formed yet, maybe Dr. Titinun was reading from news release scheduled for next week.

[cclub75]

investor confidence has been restored with the formation of a newly-elected government.

It's good to hear that investors have confidence in the newly-elected government....I guess they must not be listening to the wisdom being posted here by so many well informed long standing ThaiVisa members.

Chownah

The government hasn't been formed yet, maybe Dr. Titinun was reading from news release scheduled for next week.

We shouldn't underestimate the power of the word.

I mean, just say "Samak"... Do you feel the power ?

For instance, Samak says that he wants to push ... the mega projects... 500 billions THB... for a few thousands of km of new train lines (Bangkok post).

Anyway. That the beauty, the force, the power of the word.

What about financing ? Don't be such a party-cracker. Who cares ?

So, as a foreign investor, I certainly and definitely "have confidence in the newly-elected government". ;-)

[Old Man River]

investor confidence has been restored with the formation of a newly-elected government.

It's good to hear that investors have confidence in the newly-elected government....I guess they must not be listening to the wisdom being posted here by so many well informed long standing ThaiVisa members.

Chownah

The government hasn't been formed yet, maybe Dr. Titinun was reading from news release scheduled for next week.

No, he heard it from the Japanese media who have all the info.

[Old Man River]

Democrat voices support for withdrawal of 30% reserve requirement

Deputy Secretary-General of the Democrat party and member of the party’s economic team, Korn Chatikavanij (กรณ์ จาติกวณิช), says he is concerned over the country’s economy in both macro and micro levels, adding that the party voices support for the withdrawal of the Bank of Thailand’s 30% capital reserve requirement.

Mr Korn adds that the party does not believe in the new government’s populist policies and suggests that the government should have other policies to stimulate the economy.

The deputy secretary-general says further that the baht is likely to appreciate more and the lift of the 30% capital reserve requirement will be good for the investment atmosphere.

As for the People Power party’s secretary-general’s appointment as finance minister, Mr Korn says the secretary-general is qualified to take up the post but the Democrat party will monitor his work.

Source: Thai National News Bureau Public Relations Department - 04 February 2008

Korn is baiting the PPP with these comments (and I love it). He knows full well that the PPP does not have the expertise to handle the short term foreign capital inflow into Thailand's debt capital markets (hot money) if they lift the 30% RR. It would only lead to a further strengthening of the THB vis a vis the USD. The PPP won't abolish the 30% RR regardless of what they said only a few weeks ago because prior to the election they thought they could attract experts into their government from the outside. Since they were not successful, they are now saying perhaps they need to think about this more closely.

BTW, the Demo's would have abolished capital controls, just like they promised. They would have slashed interest rates to dissuade foreign investors from coming here. The difference is that the Demo's have the expertise to do this and note when adjustments need to be made prior to problems arising. This is not a luxury the current government has at the moment.

I imagine the 30% RR and offshore/onshore THB/USD rate is going to be with us for quite some time.

[Jai Dee]

Interest rate policy should not be imposed after capital control revocation

Kasikorn Research Center Company Limited (KRC) proposes the government three principles for considering the revocation of the 30-percent capital reserve requirement.

Firstly, the KRC would like the government to consider the appropriate timing for lifting the 30-percent capital reserve requirement. Thus, the government should not lift it when the US dollar has a tendency to depreciate in comparison to other major currencies. Secondly, the government should announce its policies clearly in order to send a positive signal to the market. Moreover, the government needs to come up with an efficient backup plan after the revocation by increasing its flexibility. Besides the three principles, the KRC suggest the government to consider issues relating to exit tax and capital outflow.

the KRC the Monetary Policy Committee (MPC) should be responsible for dealing with the interest rate policy by launching measures for preventing risks while maintaining economic stability. The KRC says if the MPC decides to introduce the policy, it should provide everyone with clear and reasonable explanations.

Source: Thai National News Bureau Public Relations Department - 15 February 2008

[Jai Dee]

Thailand's Baht Poised for Biggest Weekly Advance Since July

Thailand's baht headed for its biggest weekly gain in seven months on speculation exporters exchanged overseas earnings to guard against a falling dollar.

The currency advanced past 32.70 per dollar today for the first time since August 1997. The government this week said it will decide by April whether to lift remaining restrictions on capital entering the nation, helping buoy demand for the baht.

"The central bank hasn't been aggressively intervening'' to slow baht appreciation, said Tetsuo Yoshikoshi, a market analyst in Singapore at Sumitomo Mitsui Banking Corp. Exporters "are selling dollars, fearing some sort of change to capital controls will push the dollar lower,'' he said.

The baht rose 0.4 percent to 32.63 per dollar in onshore trading as of 10:20 a.m. in Bangkok. It advanced 0.9 percent this week, the most since the week ended July 13 last year, according to data compiled by Bloomberg. In offshore trading, the baht rose 0.3 percent to 31.88.

The currency may trade between 32.50 and 33 in the first quarter, Yoshikoshi said.

Thailand Finance Minister Surapong Suebwonglee on Feb. 12 failed to reach an accord with central bank Governor Tarisa Watanagase on alternative measures to the capital controls. The central bank imposed limits on funds entering the nation in December 2006 to slow baht gains and protect exporters.

Earnings from goods shipped overseas comprise 60 percent of the $206 billion economy.

Nervous Exporters

The central bank has lifted some of the controls including easing restrictions for real estate funds and overseas loans. Debt investors won a waiver last March from rules requiring 30 percent of investment be held in bank accounts for a year if they are hedged against currency fluctuations.

"Some people expect the Bank of Thailand will lift the 30 percent reserve requirement sometime next month,'' said Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl in Bangkok. "After the baht broke 32.80, exporters got nervous and they started selling dollars.''

Thailand's current account surplus narrowed to $1.66 billion in December from November's record high of $2.65 billion, the central bank said Jan 31. Exports rose 19.5 percent from a year earlier to $13.2 billion.

Bank of Thailand Governor Tarisa Watanagase on Jan. 28 said the bank planned to ease rules on outbound capital to help stem baht gains. A week later it extended the period exporters can convert their foreign-exchange earnings into baht to 360 days from 15 days.

Source: Bloomberg - 15 February 2008

[Old Man River]

Interest rate policy should not be imposed after capital control revocation

Kasikorn Research Center Company Limited (KRC) proposes the government three principles for considering the revocation of the 30-percent capital reserve requirement.

Firstly, the KRC would like the government to consider the appropriate timing for lifting the 30-percent capital reserve requirement. Thus, the government should not lift it when the US dollar has a tendency to depreciate in comparison to other major currencies. Secondly, the government should announce its policies clearly in order to send a positive signal to the market. Moreover, the government needs to come up with an efficient backup plan after the revocation by increasing its flexibility. Besides the three principles, the KRC suggest the government to consider issues relating to exit tax and capital outflow.

the KRC the Monetary Policy Committee (MPC) should be responsible for dealing with the interest rate policy by launching measures for preventing risks while maintaining economic stability. The KRC says if the MPC decides to introduce the policy, it should provide everyone with clear and reasonable explanations.

Source: Thai National News Bureau Public Relations Department - 15 February 2008

While I have always had high respect for K Bank's research arm, this time they really haven't said anything constructive. The PPP are in a bind. If they lift the 30% RR in order to fund their mega projects via the upcoming Vayuphak II fund, this will only further increase the value of the THB against the USD. The road show is only one month away. While the funds won't be needed for over a year, how can they make the Vayuphak II attractive to investors during a road show with capital controls in place?

It is easy to say Suraphong is a medical doctor and doesn't have the right experience to handle these issues, but realistically nobody here has this experience. At the end of the day, they could well end up releasing capital controls, watching the THB jump in value against the USD and then panic by fixing the currency similar to the past.

[A_Traveller]

I commented before that in economies exposed to the international markets, all a Finance Minister can do is to provide guidance, since their year end statement should be, in good times, well we rode that wave OK, and in bad, the market fundamentals are against us. The imposition of the controls was a short term, in my view unwise, venture. Since, for funding Thailand has to go to the market place, and the market is very different than it was last time PPP, sorry TRT, tried this, the results will be dictated by the perspective of those who view the probabilities of getting a better return, with the backdrop of a now illiquid credit market. Not in my view an easy sell any longer.

Regards

[Jai Dee]

Thai PM: Capital Controls Decision To Take About 2 Months

Thai Prime Minister Samak Sundaravej said Friday the government would make a decision on the 30% reserve requirement rules for short- term capital inflows in about two months.

"The revision on capital control rules is underway and would take about a couple months for consideration," Samak told reporters.

"I want to insist that involved agencies are working on the issue with delicate handling."

The 30% reserve requirement was imposed by the central bank in December 2006 to stem appreciation of the baht but triggered a massive stock market selloff.

The new Finance Minister Surapong Suebwonglee recently said a decision on removing the country's capital controls will be made before the policy roadshow that the government is planning for March or April.

Thailand's new government is pushing for the controversial controls to be abolished to improve the country's reputation with investors.

Source: Dow Jones - 15 February 2008

[Old Man River]

I commented before that in economies exposed to the international markets, all a Finance Minister can do is to provide guidance, since their year end statement should be, in good times, well we rode that wave OK, and in bad, the market fundamentals are against us. The imposition of the controls was a short term, in my view unwise, venture. Since, for funding Thailand has to go to the market place, and the market is very different than it was last time PPP, sorry TRT, tried this, the results will be dictated by the perspective of those who view the probabilities of getting a better return, with the backdrop of a now illiquid credit market. Not in my view an easy sell any longer.

Regards

A hard sell, definitely, but how to finance the mega projects? Thaksin wanted to raise funds via privatizations, but that turned out not to be politically feasible.

On the currency, there really are people in the Thai government that believe the Bank of Thailand can control the THB/USD exchange rate from international market impacts. Is there any wonder why Tarisa holds on to her capital controls so dearly?

[Prakanong]

I continue to think that the 30% withhold was an excellent move to stop speculation in the Thai baht.

Also, I cannot see that, in present conditions, there is any sense in encouraging foreign capital to flow in.

About the only destination for it would be property speculation, and Thailand can well do without another unsustainable property boom, thank you.

Yeah Thailand shut shut up shop, all should return to the land and live the suffiency economy!!!

Maybe you want it to be like Myanmar or North Korea in your little fantasy world and the poor should stay brutally poor while the rich in Thailand exploit them

We can see from research Thai domestic capital dried up post 97 except for property and media

[Old Man River]

This afternoon, Samak said they would now make the decision on whether to lift the capital controls in about two months.

I guess the road show is off.

[xbusman]

Today I moved a rather largish amount of money from the US to Thailand and got 32.4 as the onshore rate. My US Bank is quoting 32.1 as the offshore rate.

Over the past two weeks, I have watched the onshore gradually decline a baht and the offshore shoot up about 1.5 baht, they are now almost at parity.

Anyone want to take a stab at what this means, why its happening, and what is going to happen when they merge again?

[cclub75]

While I have always had high respect for K Bank's research arm, this time they really haven't said anything constructive. The PPP are in a bind. If they lift the 30% RR in order to fund their mega projects via the upcoming Vayuphak II fund, this will only further increase the value of the THB against the USD. The road show is only one month away. While the funds won't be needed for over a year, how can they make the Vayuphak II attractive to investors during a road show with capital controls in place?

It is easy to say Suraphong is a medical doctor and doesn't have the right experience to handle these issues, but realistically nobody here has this experience. At the end of the day, they could well end up releasing capital controls, watching the THB jump in value against the USD and then panic by fixing the currency similar to the past.

Well, some of them say that the mega project could be funded by local money (by issuing long term bonds, that insurances would be eager to buy). Sure...

But meanwhile, the previous months showed that the government needed the JBIC (japanese bank) to get loans...

Nobody seems in charge. Samak has bought 2 more months to "think".... We'll see. What will be the situation in 2 months ? Probably worse (with an even weaker USD)... What he will say then ?

As for the suggestions of the KRC "to consider issues relating to exit tax and capital outflow", it's typical of thai idiocy.

I mean to replace a capital control on inflows by a capital control on outflows... that's smart. Powerfull.

They're a trapped like rats in a cage.

[freitag1]

A government like this is one of the best ways to stop people from investing in Thailand.

[Jai Dee]

Immediate scrap of capital controls may cause appreciation of baht

The President of the Federation of Thai Capital Market Organization, Mr. Kongkiart Opartwongkarn (ก้องเกียรติ โอภาสวงการ), says lifting the 30-percent capital reserve requirement could benefit Thailand in the long run.

Mr. Kongkiart however says the government should think thoroughly before withdrawing it, as the private sector is concerned that sudden revocation may cause the Thai currency to appreciate to 30 baht per US dollar. Nevertheless, Mr. Kongkiart says he is satisfied with the government's policies that were announced at the Parliament yesterday (February 18th). He suggests the government to look into all aspects, including investments and expenditures, in order to propel the economy.

Mr. Kongkiart says exporters in Thailand should be aware of the baht's volatility, and they should not only wait for the government's assistance. He says it would take about three months for people to assess the government's performance.

Source: Thai National News Bureau Public Relations Department - 19 February 2008

[BigSnake]

Let flow let flow, darn baht is super strong for now so be it.