Singapore Banks Offer Twice The Local Rate

[george]

BAHT DEPOSITS: Singapore banks offer twice the local rate

SINGAPORE:-- Speculators believed to be responsible for offshore demand for Thai currency. Singapore banks are doubling their baht deposit interest rates over those quoted by Thai banks, reflecting high demand for baht in the offshore market, possibly by currency speculators. In a telephone interview with The Nation, OCBC Bank, the number-three bank in Singapore, said it was offering between 4.25 per cent and 4.5 per cent on baht time deposits with a minimum initial deposit of Bt500,000.

The rates offered by major banks in Thailand, including Bangkok Bank and Krung Thai Bank, are 1.5 per cent for three-month deposits and 1.75 per cent for six-month deposits. Other large banks are offering rates of 1.5 per cent to 2.5 per cent for the same periods.

In Singapore, OCBC is offering 4.25 per cent on deposits of less than B2.5 million for one to six months and 4.31 per cent on deposits of between Bt2.5 and Bt5 million. For deposits of Bt5 million to Bt10 million, it is offering 4.37 per cent and 4.5 per cent on deposits of Bt20 million and higher, over the same one-to-six-month period.

These rates are effective until tomorrow. “Time-deposit rates may change after that,” the OCBC officer said.

In addition, Bangkok Bank’s Singapore branch is offering rates of up to 4 per cent for baht deposits. However, no official at the branch could be contacted on Friday.

The higher baht interest rates in the offshore market reflect a demand for the currency. As the baht is not a vehicle for transactions in the offshore market, baht demand can only be by speculators.

Dr Virabongsa Ramangura, adviser to Finance Minister Thanong Bidaya, said last week that the Bank of Thailand had been too slow to raise interest rates in line with the global trend.

The current baht rates are too low considering the speculation against the baht in the offshore market, he said. At a seminar, he expressed his opinion that speculators had short-sold baht on expectations the unit would weaken against the US dollar.

This raised offshore demand for baht, he noted.

However, last week Bank of Thailand governor MR Pridiyathorn Devakula defended the central bank’s monetary policy, saying that it had been handled appropriately enough.

Since August this year, the central bank’s policy-signal rate has been raised by at least 200 basis points to 3.25 per cent.

“Why should we raise the rate in a hurry? Since August we have increased it by at least 2 per cent. If we raised the rate more quickly, borrowers would suffer.

“It isn’t as if we haven’t implemented a rate hike, but we must do it gradually,” Pridiyathorn said last week.

--The Nation 2005-10-03

[cclub75]

The higher baht interest rates in the offshore market reflect a demand for the currency. As the baht is not a vehicle for transactions in the offshore market, baht demand can only be by speculators.

The current baht rates are too low considering the speculation against the baht in the offshore market, he said. At a seminar, he expressed his opinion that speculators had short-sold baht on expectations the unit would weaken against the US dollar.

This raised offshore demand for baht, he noted.

<{POST_SNAPBACK}>

Well... I have some problems to understand those 2 points in the same news.

A- high rates = reflect a demand of speculators = who want to buy

B- a demand from speculators who want to sell bath !

I would rather say that speculators "anticipate" a strenghten of the bath.

No ?

[Firefan]

cclub - I fully agree - something sounds upside down there. Cheers!

[susah_sih]

Well... I have some problems to understand those 2 points in the same news.

A- high rates = reflect a demand of speculators = who want to buy

B- a demand from speculators who want to sell bath !

I would rather say that speculators "anticipate" a strenghten of the bath.

No ?

<{POST_SNAPBACK}>

For your info not only Singapore banks, banks in Hong Kong are also offering

4-5% interest on large Thai Baht deposits. I think hedge funds are planning an attack on Thai Baht. It's building on the stock market of Thailand as well.

for the simplistic process it goes like this.

They borrow Baht and use this baht to enter into future foreign exchange transaction to convert it into Dollars. And they do it in large amount and repeatedly. The Baht therefore weakens against USD because of these process which can amount to billions of USD. When the baht weakens say become 1USD=45 baht, they unwind their position and pay the loan including interest on the loan of say 8% but they pocketed 5 baht for every of their dollar. remember when they enter the transaction initially the baht was stronger at 40baht/1USD.

These hedged fund operators should be shot to death. One of the biggest player is George Soros. He stole big amount of money from SE Asia. He stole it from rich and poor people in SE Asia. This is a guy who donates millions of dollars from stealing billions of dollars. Robert Rubin, ex MOF the US, put his money with George Soros from his days at Goldman Sachs and was critizing Thailand & Malaysia for making the baht and ringgit closed from foreign hands (in the old days offshore deposits of baht and ringgit are readily available).

Edited October 3, 2005 by susah_sih

[samran]

These hedged fund operators should be shot to death. One of the biggest player is George Soros. He stole big amount of money from SE Asia. He stole it from rich and poor people in SE Asia. This is a guy who donates millions of dollars from stealing billions of dollars. Robert Rubin, ex MOF the US, put his money with George Soros from his days at Goldman Sachs and was critizing Thailand & Malaysia for making the baht and ringgit closed from foreign hands (in the old days offshore deposits of baht and ringgit are readily available).

While you fall for the populist mythology mouthed by corrupt Thai and Malaysian politicians, perhaps you should look a little deeper into the situation.

Thailand for all intents and purposes pegs its currency to the US dollar. It does so cause most senior policy makers can't bear to have the Thai economy fully exposed to the compeition in the world economy. Rather than actually reform the thai economy so that the currency can stand on its own two feet, it keeps the Baht artifically strong, so it can purchase imports cheaply for the rest of the world. Thailand, unfortunately, is trying to get a free ride based on the strength of other countries, hoping that they will never have to pay for it.

This is what attracts the hedge funds. They know if there is a gap in the market, they'll exploit it. That is their job...and at the end of the day, they can muster more financial leverage than a central ban and can break it.

Many other countries have learnt the lesson on never letting bureacrats betting against the financial markets. The financial markets win every time. You will never see Soros 'attack' a currency which is freely floated. Thailand have been burnt once, and still hasn't learnt.

[cclub75]

Well, this becomes a very interesting thread.

But maybe we could elaborate about what will be a plan to attack thai bath ?

I still believe that the higher interest rates offered in HK and Singapore reflect the fact that people believe the BOT will continue to increase its rate, allowing the THB to strenghten. The problem of the BOT is that they want to play the "greenspan scenario" = "soft landing". So they have a slow pace.

Regarding Samran message, I fully agree.

In 97, Bath was attacked because it was weak, over valuated, and with some bad domestics policies and anomalies (bubble in real estate), bad debts etc.

Almost 10 years later, many asian people still believe the tale that some ugly foreigners stole their money. This is a tale for children.

As Samran said : a speculator will always "sniff" like a dog anomalies regarding a currency and it's country. As hunters, they hunt "easy" target (small and weak, or even already wounded) to maximize their chances.

While you fall for the populist mythology mouthed by corrupt Thai and Malaysian politicians, perhaps you should look a little deeper into the situation.

Thailand for all intents and purposes pegs its currency to the US dollar. It does so cause most senior policy makers can't bear to have the Thai economy fully exposed to the compeition in the world economy. Rather than actually reform the thai economy so that the currency can stand on its own two feet, it keeps the Baht artifically strong, so it can purchase imports cheaply for the rest of the world. Thailand, unfortunately, is trying to get a free ride based on the strength of other countries, hoping that they will never have to pay for it.

This is what attracts the hedge funds. They know if there is a gap in the market, they'll exploit it. That is their job...and at the end of the day, they can muster more financial leverage than a central ban and can break it.

Many other countries have learnt the lesson on never letting bureacrats betting against the financial markets. The financial markets win every time. You will never see Soros 'attack' a currency which is freely floated. Thailand have been burnt once, and still hasn't learnt.