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FOREIGN EXCHANGE

Govt aims to cash in on strong baht

By Business Desk

The Nation

The government is pulling together a team to tailor an investment strategy for each industry so that they all make the most from the favourable exchange rate.

"We have wasted time discussing measures to keep the baht in check. We have learned that we can't fight the US' weak dollar policy. Now, we have to think how to reap maximum benefits from the strong currency," Finance Minister Korn Chatikavanij said yesterday.

The investment plans will be formulated according to the specific circumstances of each industry, to address problems at the industry and country levels. The results will be presented to Prime Minister Abhisit Vejjajiva for approval.

Korn said a discussion with the private sector is in the picture, based on the model practised in Malaysia, which recently highlighted the public and private roles in developing 12 key industries.

The strong baht was easing the pressure on the government's investment budget, he said.

"State enterprises' investment in the 2010 fiscal year was slashed about Bt5 billion due to the strong currency. If the baht continues to go up, the savings could exceed Bt10 billion in the 2011 fiscal year," he said.

At the meeting chaired by Deputy Prime Minister Trairong Suwankhiri, the State Enterprise Policy Committee also resolved to speed up state enterprise projects, especially those that require high import contents, to take advantage of the improved terms of trade.

"This would help the country save as much as Bt13.63 billion” from this quarter to next year if the baht stays above 30 per dollar, he said. If the baht was Bt29, the cost savings could be more than Bt18.51 billion.

Parson Singha, chief market strategist for HSBC Thailand, expects the baht to rise further, but at a slower pace than in the past three months, as the US is embarking on a second round of quantitative easing worth US$600 billion.

HSBC sees the baht gaining further to 28.6 per dollar by next year's end.

A Bangkok Bank treasurer said the baht should end this year at 29.55-29.60 and then may weaken next year in the absence of further quantitative easings in the US. The baht closed yesterday at Bt29.66.

Capital inflows are expected to continue boosting asset prices.

Charamporn Jotikasthira, president of the Stock Exchange of Thailand, conceded that there were bubbles in some stocks, as they were trading beyond fundamentals. Still, he believes that capital controls in the equity market are unlikely.

-- The Nation 2010-11-09