Continued Baht Retreat Takes Pressure Off B O T

[webfact]

Continued baht retreat takes pressure off BOT
Nakarin Srilert,
Sarun Kijvasin
The Nation

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Possible bubble in property market remains a worry, Kittiratt says; most funds flowing into bonds

BANGKOK: -- Pressure on the Bank of Thailand has cooled down with the government and private sector apparently pleased by the recent depreciation of the baht and conceding that any move to stem foreign funds flowing into the country may lead to "bubbles" in property prices.

Areepong Bhoocha-oom, the permanent secretary for finance, said that most recent inflows were for long-term investment. He was referring to Bank of Thailand Governor Prasarn Trairatvorakul's letter of reply to Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong.

"The BOT data shows that inflows so far this year are mostly destined for the bond market, expecting long-term returns," Areepong said. "Funds to the bond market are eight times above those to the stock market...

"Long-term investment is a boon to Thailand. Now, Thailand has to look forward, to handle the future well. Any measure (to control the inflows) must be thoroughly considered as that could affect many investment projects planned by the country."

The BOT's data showed that net capital inflows in the first quarter totalled $4.77 billion (about Bt140 billion). So far this month, net bond purchases by foreign investors totalled $2.4 billion. In the first quarter, their net purchases were $9.6 billion, according to the Thai Bond Market Association.

Areepong said on Monday that if the baht hit 28 per dollar, some measures would be imposed.

But yesterday the baht fell for a seventh day, on concerns of capital controls, to below 29 per US dollar, which was down from its new 16-year peak at 28.56 earlier this month. The year-to-date appreciation narrowed from 7 per cent to 4.3 per cent.

Members of the Monetary Policy Committee convened yesterday for an economic briefing. It was the first time that the public learnt that Kittiratt had sent a letter to Prasarn, asking for clarification on three points - how would the rate affect capital movement; the impact from "sterilisation" to absorb excess liquidity; and the central bank's suggestion to the MPC.

Earlier, Kittiratt sent a letter to BOT chairman Virabongsa Ramangkura, pressuring for a rate cut and calling for the board of governors to take responsibility for the swelling accounting loss incurred by the "sterilisation".

In the note of reply, brought to Prime Minister Yingluck Shinawatra yesterday by Kittiratt, Prasarn said that the BOT had no mandate to intervene the MPC's decision making. He said the baht had appreciated due to inflows to the bond market and expressed concern that a rate cut could lead to more borrowing and an increase in property prices.

Prasarn explained that commercial banks now control only 40 per cent of property loans, while the rest are extended by other institutions which are not under central bank supervision.

The MPC has left the policy rate unchanged for the previous four meetings at 2.75 per cent. Its next meeting is set for May 29.

Areepong admitted that the "sterilisation" showed the BOT's accounting loss, but said the figures could not be unveiled.

At the Cabinet meeting yesterday, Kittiratt informed all that the rise of the baht had hit the export sector hard and that it may deter Thailand from achieving the 8-9 per cent export growth target this year, Areepong said. Yingluck also instructed related ministries, particularly Commerce, to devise urgent strategies to help affected business operators.

The weaker baht appears to have cooled tempers down. The Federation of Thai Industries earlier called for drastic measures such as capital controls for short-term inflows and a hefty policy rate cut. However, FTI chairman Payungsak Chartsutipol said after a discussion with the BOT governor yesterday he was pleased with the central bank's approach to balance economic stability and foreign exchange rates.

But, he said that if the pace of the baht's rise quickens, the FTI would seek another meeting with Prasarn before the MPC's May 29 meeting. He said that if the baht moves beyond 28 to the dollar, exports this year could only grow 4.92 per cent.

Capital inflows have boosted sentiment and spending in the country. To cash in on increasing demand for property, developers have launched a number of projects. According to the Real Estate Information Centre, about 40,000 residential units were launched in the first quarter of this year and the growth momentum continued in April.

According to Bank of Thailand data, the good news is that in March, commercial loan growth slowed, in line with declining private consumption and investment, although automobile purchases continued to expand well as a result of an order backlog and marketing promotions by car manufacturers.

Mathee Supapongse, director of the central bank's Domestic Economy Department, said that the slowdown would help ease "bubble problem".

In March, the value of exports rose 4.9 per cent month on month to $20.49 billion, while imports dropped slightly by 0.4 per cent on-month to $18.5 billion.

Meanwhile, tourism grew robustly, with 2.3 million foreign tourist arriving due to an increase in the number of visitors from many countries, notably China and Russia. Tourists from Malaysia dropped, however, as a result of tension in the three southern provinces.


-- The Nation 2013-05-01

[yoshiwara]

Talking down the baht will give a little time for the BOT to put some policies into place, but if the markets eventually decide that it all amounts to so much hot air then the pressure will resume. Government concern will be in any headline layoffs in export industries.

[davejones]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

[MaxYakov]

http://www.exchange-rates.org/history/THB/USD/T

[MAN2SIN2BKK]

Just continue talking the baht down........ keep talking until it is back to 40+ to the USD, 50+ to the EUR and 60+ to the GBP and then talk some more to keep them there!

[andres]

Just continue talking the baht down........ keep talking until it is back to 40+ to the USD, 50+ to the EUR and 60+ to the GBP and then talk some more to keep them there!

Wake up, it will never happen! New international order

[lifeincnx]

This badly managed bubble will burst, no doubt IMHO. Short term outside investors (bonds, etc.) will yank their money in a heartbeat and move to safer havens as the Thai credit squeeze mushrooms. Thai banks have already begun to curtail condo loans - that's the red flag we've seen around the world (and here) in 1995, 2000, and 2008. Zero down anyone?

That said, rather than only focusing on our depreciated dollars, pounds, and Euros against the baht here, I invested in THD back in 2010. It's an NYSE exchange traded fund which corresponds in gain/loss to the MSCI Thailand IMI 25/50 Index. Today it is trading at USD95 per share. That's up 51% since my initial investment and far outweighs any day-to-day pinch I deal with here. If that is not a bubble I don't know what is. Sure, it's a paper gain but an 8% stop loss cuts real downside.

http://finance.yahoo.com/q?s=thd&ql=1

[nev]

Just continue talking the baht down........ keep talking until it is back to 40+ to the USD, 50+ to the EUR and 60+ to the GBP and then talk some more to keep them there!

Are they the only 3 that matters? they are low not because of the thai baht but the problems in those two countries and the euro comunity mentioned, the aussie has stayed the same as it was 9 years ago due to a strong economy, the baht is doing fine as it is no talking is needed.

[khunken]

The real issue is that the PTP just cannot allow any independence of thought or action by one of the few really independent bodies (BOT) in the country. Just like the CC.

I have far more confidence in the BOT doing what is best for the whole country than PTP with their known selfish agendas.

[yoshiwara]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

It isn't as straightforward as that for all countries vis a vis a floating currency.

HK, Singapore, China, none of them freely float and in slightly different ways.

(HK: tight peg, China: adjustable peg, Singapore: basket).

Also central bank policy affects even free floating currencies and then we have the issue of USD as a reserve currency, so life can get complicated and particularly so for relatively small countries such as Thailand which can get squeezed.

[Naam]

Just continue talking the baht down........ keep talking until it is back to 40+ to the USD, 50+ to the EUR and 60+ to the GBP and then talk some more to keep them there!

Are they the only 3 that matters? they are low not because of the thai baht but the problems in those two countries and the euro comunity mentioned, the aussie has stayed the same as it was 9 years ago due to a strong economy, the baht is doing fine as it is no talking is needed.

the "aussie" stayed "same" except for some "minor" fluctuations

[meom]

This badly managed bubble will burst, no doubt IMHO. Short term outside investors (bonds, etc.) will yank their money in a heartbeat and move to safer havens as the Thai credit squeeze mushrooms. Thai banks have already begun to curtail condo loans - that's the red flag we've seen around the world (and here) in 1995, 2000, and 2008. Zero down anyone?

That said, rather than only focusing on our depreciated dollars, pounds, and Euros against the baht here, I invested in THD back in 2010. It's an NYSE exchange traded fund which corresponds in gain/loss to the MSCI Thailand IMI 25/50 Index. Today it is trading at USD95 per share. That's up 51% since my initial investment and far outweighs any day-to-day pinch I deal with here. If that is not a bubble I don't know what is. Sure, it's a paper gain but an 8% stop loss cuts real downside.

http://finance.yahoo.com/q?s=thd&ql=1

The bond market seems to be quite complicated so can you explain why short term outside investors would invest in bonds in the first

place and how would they yank out their money in a heartbeat without incurring a loss when the bubble bursts?

[lifeincnx]

This badly managed bubble will burst, no doubt IMHO. Short term outside investors (bonds, etc.) will yank their money in a heartbeat and move to safer havens as the Thai credit squeeze mushrooms. Thai banks have already begun to curtail condo loans - that's the red flag we've seen around the world (and here) in 1995, 2000, and 2008. Zero down anyone?

That said, rather than only focusing on our depreciated dollars, pounds, and Euros against the baht here, I invested in THD back in 2010. It's an NYSE exchange traded fund which corresponds in gain/loss to the MSCI Thailand IMI 25/50 Index. Today it is trading at USD95 per share. That's up 51% since my initial investment and far outweighs any day-to-day pinch I deal with here. If that is not a bubble I don't know what is. Sure, it's a paper gain but an 8% stop loss cuts real downside.

http://finance.yahoo.com/q?s=thd&ql=1

The bond market seems to be quite complicated so can you explain why short term outside investors would invest in bonds in the first

place and how would they yank out their money in a heartbeat without incurring a loss when the bubble bursts?

"in a heartbeat" is surely an overstatement on my part. However, investors and market analysts will be watching closely to see whether the Thai bond market moves as predicted or not.

[Naam]

This badly managed bubble will burst, no doubt IMHO. Short term outside investors (bonds, etc.) will yank their money in a heartbeat and move to safer havens as the Thai credit squeeze mushrooms. Thai banks have already begun to curtail condo loans - that's the red flag we've seen around the world (and here) in 1995, 2000, and 2008. Zero down anyone?

That said, rather than only focusing on our depreciated dollars, pounds, and Euros against the baht here, I invested in THD back in 2010. It's an NYSE exchange traded fund which corresponds in gain/loss to the MSCI Thailand IMI 25/50 Index. Today it is trading at USD95 per share. That's up 51% since my initial investment and far outweighs any day-to-day pinch I deal with here. If that is not a bubble I don't know what is. Sure, it's a paper gain but an 8% stop loss cuts real downside.

http://finance.yahoo.com/q?s=thd&ql=1

The bond market seems to be quite complicated so can you explain why short term outside investors would invest in bonds in the first

place and how would they yank out their money in a heartbeat without incurring a loss when the bubble bursts?

"in a heartbeat" is surely an overstatement on my part. However, investors and market analysts will be watching closely to see whether the Thai bond market moves as predicted or not.

what exactly are the predictions for the Thai bond market?

[RogueLeader]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

[RogueLeader]

conceding that any move to stem foreign funds flowing into the country may lead to "bubbles" in property prices

Surely it'd have the opposite effect? Or are they afraid of bursting what's almost certainly a bubble already?

[Joe Mamma]

My wife put her baht in the laundry to shrink them and help the country.

[Naam]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

source: basic economics.

[RogueLeader]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

source: basic economics.

Haha. Yeah, no, but really: source?

[Naam]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

source: basic economics.

Haha. Yeah, no, but really: source?

it is common knowledge that intervention costs tons of money and is hardly ever successful. take a look at the balance sheet of the Swiss National Bank. at least the SNB was (until now) quite successful. but in the majority of cases money was just wasted without causing the desired effect, e.g. Bank of England trying to defend Sterling in 1993, result failure but lining George Soros' pockets with a cool billion plus.

[i claudius]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

source: basic economics.

Haha. Yeah, no, but really: source?

yes ,but about par for the course.

[lifeincnx]

This badly managed bubble will burst, no doubt IMHO. Short term outside investors (bonds, etc.) will yank their money in a heartbeat and move to safer havens as the Thai credit squeeze mushrooms. Thai banks have already begun to curtail condo loans - that's the red flag we've seen around the world (and here) in 1995, 2000, and 2008. Zero down anyone?

That said, rather than only focusing on our depreciated dollars, pounds, and Euros against the baht here, I invested in THD back in 2010. It's an NYSE exchange traded fund which corresponds in gain/loss to the MSCI Thailand IMI 25/50 Index. Today it is trading at USD95 per share. That's up 51% since my initial investment and far outweighs any day-to-day pinch I deal with here. If that is not a bubble I don't know what is. Sure, it's a paper gain but an 8% stop loss cuts real downside.

http://finance.yahoo.com/q?s=thd&ql=1

The bond market seems to be quite complicated so can you explain why short term outside investors would invest in bonds in the first

place and how would they yank out their money in a heartbeat without incurring a loss when the bubble bursts?

"in a heartbeat" is surely an overstatement on my part. However, investors and market analysts will be watching closely to see whether the Thai bond market moves as predicted or not.

what exactly are the predictions for the Thai bond market?

Generally, Thai gov bonds advanced since mid February as the the improving economy lured more funds from overseas. Speculative on the market here but it played out. Plus no rate hikes simply made it easier for foreign investors to buy bonds betting on continued strong growth.

Here's a recent Thai take on the bond market....

http://www.nationmultimedia.com/business/Capital-inflow-and-investment-in-the-Thai-bond-mar-30203618.html

[samran]

The market should set exchange rates. If governments intervene, they usually just end up wasting a ton of money.

Source?

source: basic economics.

Haha. Yeah, no, but really: source?

History - half a dozen central banks across SE Asia in the late 1990's. Bank of England with the ERM. Australia pre-1983 before floating the dollar.