To Cover Thb Expenses Which Non Thb Currency To Invest In?

[THAIPHUKET]

Which major liquid markets are more likely to move in sink with the THB currency and should be considered for investments? Goal is to cover part of THB expenses with non-THB income .

[PCA]

this question is not possible to answer if there is no further statement about the situation. The situation is explained by saying whether you want to make additional money here or you need to make money in order to stay here to cover surmounting expenses.

[THAIPHUKET]

Fair question. No need to make money here, income is in € therefore the desire to insulate somewhat from fluctuations by re-allocating investments. No clue about the Asian markets, interested in long term non-Thai opportunities. In short, exploring.......

[yoshiwara]

As I read it you want to invest in a country/countries on a similar economic trajectory to Thailand and presumably offering better security. Rule out direct investment in Cambodia, Laos, Vietnam, Myanmar as financial markets too limited for you. That would leave (in the region) Malaysia and Singapore. If you opened a bank account in either Singapore or Hong Kong you could buy into a fund (depending on desired risk)with exposure to the region overall or desired countries. You might also be able to do this via a Malaysian bank but other will have to advise you on this.

[AyG]

Thailand's currently policy of a perversely high interest rates have lead to the Baht being overvalued. No other country in the region has a similar policy. Ergo, there is no suitable proxy for the Baht.

However, when the government comes to its senses and reduces interest rates (or is forced to), the Baht should fall, meaning that holding currencies other than that Baht should show a gain in Baht terms.

The safest approach, however, is to cover THB expenses purely with THB income, eliminating the exchange rate risk.

[Naam]

Thailand's currently policy of a perversely high interest rates have lead to the Baht being overvalued. No other country in the region has a similar policy. Ergo, there is no suitable proxy for the Baht.

However, when the government comes to its senses and reduces interest rates (or is forced to), the Baht should fall, meaning that holding currencies other than that Baht should show a gain in Baht terms.

The safest approach, however, is to cover THB expenses purely with THB income, eliminating the exchange rate risk.

is the AUD also overvalued because of Australia's "perversely high interest rates"? what about the perversely high rates of South Korea, New Zealand and the utmost perversely high interest rate of Malaysia which is even higher than Thai rates?

and how does one label Indonesia's benchmark interest rate of 5.75 or India's 7.25% not to mention Viet Nam's rate of 9.0%?

[AyG]

Thailand's currently policy of a perversely high interest rates have lead to the Baht being overvalued. No other country in the region has a similar policy. Ergo, there is no suitable proxy for the Baht.

However, when the government comes to its senses and reduces interest rates (or is forced to), the Baht should fall, meaning that holding currencies other than that Baht should show a gain in Baht terms.

The safest approach, however, is to cover THB expenses purely with THB income, eliminating the exchange rate risk.

is the AUD also overvalued because of Australia's "perversely high interest rates"? what about the perversely high rates of South Korea, New Zealand and the utmost perversely high interest rate of Malaysia which is even higher than Thai rates?

and how does one label Indonesia's benchmark interest rate of 5.75 or India's 7.25% not to mention Viet Nam's rate of 9.0%?

An interest rate simply being high doesn't make it "perversely" so. There may be perfectly good reasons for its being high. However, in the case of the Baht, the high rate is harming business and the broader economy because of its effect on the exchange rate. The only apparent reason for its not having been reduced is the mutual loathing of two certain individuals. There's no rational economic reason that I can think of for its current value. That makes it "perverse".

[fletchsmile]

Not really clear from your post of your intentions. The best way to hedge THB expenses is with THB income (or assets that can generate gains), such as THB income from cash, bonds, property (including funds), and my favourite equities. Obviously with the different asset classes you're taking on different kinds of risk, and the capital values will fulctuate differently, but they'll remove the FX risk, in return for varying degrees of other risk.

If it's simply the currency you are worried about and the EUR/THB rate, and you want a currency that will be less volatile vs THB than EUR, then you might want to have a look at SGD.

I tried to post a graph below but couldn't so tried to post the data fields. If you look at month-end SGD/THB rates from 30Dec99 to 30April 2013, it has traded in a range of around 22.0 to 25.4 (month-end rates), with an average of around 23.9. This average is pretty close to where it sits at the moment.

22.5195

22.0153

22.1495

22.071

22.2820

22.618

22.690

23.832

23.743

24.246

24.909

24.974

25.019

24.373

24.594

24.835

25.034

25.095

24.852

25.362

25.314

25.181

24.508

23.968

23.869

23.984

23.855

23.444

23.883

23.724

23.506

23.845

24.110

24.340

24.522

24.625

24.849

24.597

24.600

24.295

24.144

24.063

23.873

23.867

23.363

22.933

22.915

23.098

23.242

23.153

23.082

23.440

23.516

23.853

23.737

23.986

24.297

24.605

24.661

24.079

23.745

23.519

23.585

23.585

24.130

24.284

24.478

25.075

24.566

24.306

24.061

24.394

24.657

23.993

24.180

24.036

23.828

24.243

24.242

23.976

23.859

23.656

23.478

23.314

23.561

22.766

22.105

23.009

22.863

22.631

22.569

22.316

22.502

23.072

23.527

23.320

23.445

23.314

22.831

22.865

23.39

23.83

24.64

24.49

24.04

23.73

23.87

23.22

24.38

23.04

23.21

23.34

23.83

23.80

23.50

23.65

23.60

23.82

23.87

23.99

23.76

23.56

23.53

23.15

23.58

23.19

23.18

23.73

23.08

23.12

23.17

22.89

23.49

24.35

24.11

24.03

24.45

24.55

25.03

24.70

24.95

23.71

24.33

24.35

24.45

24.67

24.20

24.52

24.84

24.77

25.14

25.37

25.14

25.11

25.15

25.15

25.06

24.08

24.02

23.62

23.81

Fletch

Edited May 28, 2013 by fletchsmile

[Naam]

SGD THB 10Y chart:

[Naam]

Thailand's currently policy of a perversely high interest rates have lead to the Baht being overvalued. No other country in the region has a similar policy. Ergo, there is no suitable proxy for the Baht.

However, when the government comes to its senses and reduces interest rates (or is forced to), the Baht should fall, meaning that holding currencies other than that Baht should show a gain in Baht terms.

The safest approach, however, is to cover THB expenses purely with THB income, eliminating the exchange rate risk.

is the AUD also overvalued because of Australia's "perversely high interest rates"? what about the perversely high rates of South Korea, New Zealand and the utmost perversely high interest rate of Malaysia which is even higher than Thai rates?

and how does one label Indonesia's benchmark interest rate of 5.75 or India's 7.25% not to mention Viet Nam's rate of 9.0%?

An interest rate simply being high doesn't make it "perversely" so. There may be perfectly good reasons for its being high. However, in the case of the Baht, the high rate is harming business and the broader economy because of its effect on the exchange rate. The only apparent reason for its not having been reduced is the mutual loathing of two certain individuals. There's no rational economic reason that I can think of for its current value. That makes it "perverse".

in my view the only apparent reason is Thailand's inflation. based on the prevailing inflation rate even a much higher rate than the present 2.75% would be justified.

[fletchsmile]

Always the master of graphs

The other interesting thing that comes out of your graph is the difference in our rates around say June 2007, with 2006-2007 being another colourful period in Thai history.

It's also a point worth mentioning, to clarify for people that weren't around that the onshore and offshore rates diverged significantly around that time. The USD/THB rates for example differed by up to about 10% sometimes in that period. The graph you post is based on offshore rates, I'm assuming. Whereas my numbers are based on onshore rates.

eg if someone looks on BOT's website for 30 June 2007, the buy sell rates were between 22.3 - 22.7, compared to a shade over 21 on the offshore graph.

http://www.bot.or.th/English/Statistics/FinancialMarkets/ExchangeRate/_layouts/application/exchangerate/exchangerate.aspx

So a general reminder for OP, would be you usually get the best THB rates onshore, and be mindful that Thailand does impose capital restrictions from time to time

Cheers

Fletch

[Naam]

The graph you post is based on offshore rates

correct! it does not reflect the reality during the period you mentioned.

[THAIPHUKET]

Fletchsmile, your point is not to be neglected=

So a general reminder for OP, would be

1. you usually get the best THB rates onshore,

2. be mindful that Thailand does impose capital
restrictions from time to time.

I never would want my money to be trapped.

[yoshiwara]

Fletchsmile, your point is not to be neglected=

So a general reminder for OP, would be

1. you usually get the best THB rates onshore,

2. be mindful that Thailand does impose capital

restrictions from time to time.

I never would want my money to be trapped.

If Thailand does introduce capital inflow measures watch out for additional foreigner property taxes similar to HK and Singapore or even Malaysia. Then watch the effect on foreign held property in Thailand.

[THAIPHUKET]

BINGO YOSHIWARA=

Then watch the effect on foreign held property in Thailand.

[yoshiwara]

BINGO YOSHIWARA=

Then watch the effect on foreign held property in Thailand.

I have got no bloody idea whether they will, but...

...just for interest both HK and Singapore introduced 15% on non-permanent residents buying property and in Malaysia foreigners now forbidden to buy property under the price of (I think) 500,000 MYR. In all 3 cases property targeted rather than general capital inflow which certainly remains open in both Singapore and Hong Kong.

Edited May 29, 2013 by yoshiwara

[Naam]

BINGO YOSHIWARA=

Then watch the effect on foreign held property in Thailand.

I have got no bloody idea whether they will, but...

...just for interest both HK and Singapore introduced 15% on non-permanent residents buying property and in Malaysia foreigners now forbidden to buy property under the price of (I think) 500,000 MYR. In all 3 cases property targeted rather than general capital inflow which certainly remains open in both Singapore and Hong Kong.

Malaysia's retiree program contained always the provision of minimum price for property. MYR 500k minimum has been set jan1, 2010 (increased from MYR 300k).

[yoshiwara]

BINGO YOSHIWARA=

Then watch the effect on foreign held property in Thailand.

I have got no bloody idea whether they will, but...

...just for interest both HK and Singapore introduced 15% on non-permanent residents buying property and in Malaysia foreigners now forbidden to buy property under the price of (I think) 500,000 MYR. In all 3 cases property targeted rather than general capital inflow which certainly remains open in both Singapore and Hong Kong.

Malaysia's retiree program contained always the provision of minimum price for property. MYR 500k minimum has been set jan1, 2010 (increased from MYR 300k).

I wasn't aware of the earlier limit, but I guess it had become a little bit redundant re prices in the main centres. There was some talk of the limit being further raised to 1m in 2012 but that seems to have gone away.

[ajarnpot]

Singapore dollar ?

[Naam]

BINGO YOSHIWARA=

Then watch the effect on foreign held property in Thailand.

I have got no bloody idea whether they will, but...

...just for interest both HK and Singapore introduced 15% on non-permanent residents buying property and in Malaysia foreigners now forbidden to buy property under the price of (I think) 500,000 MYR. In all 3 cases property targeted rather than general capital inflow which certainly remains open in both Singapore and Hong Kong.

Malaysia's retiree program contained always the provision of minimum price for property. MYR 500k minimum has been set jan1, 2010 (increased from MYR 300k).

I wasn't aware of the earlier limit, but I guess it had become a little bit redundant re prices in the main centres. There was some talk of the limit being further raised to 1m in 2012 but that seems to have gone away.

Malaysia has its own method to protect ethnic Malays (Bumiputras) by reserving certain land and property exclusively for them. even Malay citizens of Chinese or Indian ethnicity aren't allowed to purchase these properties, no matter how many generations ago their ancestors came to the country.

[yoshiwara]

Malaysia has its own method to protect ethnic Malays (Bumiputras) by reserving certain land and property exclusively for them. even Malay citizens of Chinese or Indian ethnicity aren't allowed to purchase these properties, no matter how many generations ago their ancestors came to the country.

The ethnic restriction play is one of the reasons why I have baulked at investing in Malaysia. However, I thought it was more about employment than property. Is it a legalised restriction re property? Or just something one discovers on the groundwhen searching?

[Naam]

Malaysia has its own method to protect ethnic Malays (Bumiputras) by reserving certain land and property exclusively for them. even Malay citizens of Chinese or Indian ethnicity aren't allowed to purchase these properties, no matter how many generations ago their ancestors came to the country.

The ethnic restriction play is one of the reasons why I have baulked at investing in Malaysia. However, I thought it was more about employment than property. Is it a legalised restriction re property? Or just something one discovers on the groundwhen searching?

newspaper ads and real estate agents mention in nearly all cases "Bumis only" if that restriction exists.

[THAIPHUKET]

interesting discourse, I learned a lot! Back to Singapore Dollar, I hear that banking fees etc are very high. Is this an alternative http://tiny.cc/yinxxw , or MSCI Singpore Index ETF, or MSCI Singapore Small Cap Index ETF?

[AyG]

The ETFs you mention are both equity ETFs, so whilst you get exposure to the SGD, you're also exposed to equity market risk, which is probably not what you want.

A better option would be FXSG which exposes you to the currency, but not to the equity markets.

[Naam]

interesting discourse, I learned a lot! Back to Singapore Dollar, I hear that banking fees etc are very high. Is this an alternative http://tiny.cc/yinxxw , or MSCI Singpore Index ETF, or MSCI Singapore Small Cap Index ETF?

to hold Singapore Dollars you don't need an account with a Singapore bank. any average bank in any civilised country will open an SGD account for you. that does of course not apply to the clownish financial institutions in Thailand... even though they pretend to be banks.

[AyG]

interesting discourse, I learned a lot! Back to Singapore Dollar, I hear that banking fees etc are very high. Is this an alternative http://tiny.cc/yinxxw , or MSCI Singpore Index ETF, or MSCI Singapore Small Cap Index ETF?

to hold Singapore Dollars you don't need an account with a Singapore bank. any average bank in any civilised country will open an SGD account for you. that does of course not apply to the clownish financial institutions in Thailand... even though they pretend to be banks.

To pick a Thai bank at random, Bank of Ayudhya offers current, savings and fixed deposit accounts in USD, EUR, JPY, GBP, CHF, AUD, HKD, DKK, NOK, SEK, CNY and, yes, SGD.

Bangkok Bank offers accounts in all the above plus NZD and CAD.

Doesn't look so clownish to me.

[THAIPHUKET]

This shows, AyG, how ignorant it has made me not to speak Thai. I never asked my bank BKK Bank! Shame on me. I guess I would pay 4 times conversion ,transfer from € to THB , THB to SGD and then when I need actual cash from SGD to THB, correct? If that is the way, so be it, it´s part of the hedging cost against the €. Although it seems the market has become immune, no matter how pessimistic the forecasts.

[topt]

This shows, AyG, how ignorant it has made me not to speak Thai. I never asked my bank BKK Bank! Shame on me. I guess I would pay 4 times conversion ,transfer from € to THB , THB to SGD and then when I need actual cash from SGD to THB, correct? If that is the way, so be it, it´s part of the hedging cost against the €. Although it seems the market has become immune, no matter how pessimistic the forecasts.

I would suggest being very careful what those conversion costs may be and checking first. I happened to have a conversation with Lloyds International Offshore last night and (apart from that they do not do SGD any more) they would charge a "sliding margin" on the transaction -

0-£25k 2.6%

£25k-£50k 1.5%

£50k-£100k 1.2%

£100K-£150 1%

£150k-£500K 0.80%

£500k-£750k 0.50%

£750K+ 0.20%

The Thai banks may well be a lot more competitive - be interested to know if you do find out?

[AyG]

This shows, AyG, how ignorant it has made me not to speak Thai. I never asked my bank BKK Bank! Shame on me. I guess I would pay 4 times conversion ,transfer from € to THB , THB to SGD and then when I need actual cash from SGD to THB, correct? If that is the way, so be it, it´s part of the hedging cost against the €. Although it seems the market has become immune, no matter how pessimistic the forecasts.

Actually, no. You can deposit directly in SGD if you have them. That's only two conversions: EUR to SGD (then send to Thailand), then SGD to THB when you need the cash.

And you don't need to speak Thai to find out about these accounts. The pages where I got the information about Bangkok Bank and Krung Sri were both in English on their websites.

[Naam]

interesting discourse, I learned a lot! Back to Singapore Dollar, I hear that banking fees etc are very high. Is this an alternative http://tiny.cc/yinxxw , or MSCI Singpore Index ETF, or MSCI Singapore Small Cap Index ETF?

to hold Singapore Dollars you don't need an account with a Singapore bank. any average bank in any civilised country will open an SGD account for you. that does of course not apply to the clownish financial institutions in Thailand... even though they pretend to be banks.

To pick a Thai bank at random, Bank of Ayudhya offers current, savings and fixed deposit accounts in USD, EUR, JPY, GBP, CHF, AUD, HKD, DKK, NOK, SEK, CNY and, yes, SGD.

Bangkok Bank offers accounts in all the above plus NZD and CAD.

Doesn't look so clownish to me.

please provide a link. you mentioned CNY accounts which are not even available in Singapore.