Capital Inflow Tax

[besth]

i wonder what problem is discussed here. all restrictions (except for foreign sources buying short term domestic bonds denominated in THB) were lifted yesterday evening.

Good that this is still the situation.

After reading some of the last posts I thought things might have gone into a game of "now we'll keep 30% of your money/now we won't" and we were on one of the six hours "we'll keep it" period of the day.

Anyway, this sort of scares do nothing for the confidence of foreign investors, of any size.

Unbelievable that the government did something like this, but it is almost as surprising that they have corrected it, and that is not a good thing. Some people must have made a lot of money in the past two days.

[Naam]

"Unbelievable that the government did something like this, but it is almost as surprising that they have corrected it, and that is not a good thing."

*****

let's be fair. it was not the government but (according to my sources) the BOT acted without governmental approval and issued not only drastic but (in my not so humble opinion) quite stupid restrictions. after the SET bloodbath it seems the government intervened and the central bankers had to revoke their decision.

whatever happened, the fact remains that foreign investors will be scared for quite a while as the flip-flop decisions did not exactly create confidence. the remaining restriction that foreign investors are hit with the 30% reserve requirement for 12 months when buying short term bonds will yield (in my view) a positive result.

what really surprised is the naiveté of some participants of thaivisa-forum who didn't even take time to read the central bank measures but resorted to unwarranted panic postings.

[DrDweeb]

Its a catch 22 for condo buyers. If you transfer less then 800,000 baht you wont get the necessary FET certificate. If you transfer more ,they might withold 30% of it. Ive got my swift form filled out and ready to post today, but wont do it until this matter is cleared. Between that and the anticipated empty rental condos vacated by the visa runners whose 90 days run out, it might be a good idea to hold off on condo purchases. IMHO

BoT has been rather clear on this: money transferred to buy a property is not concerned by the new rule. Of course u could always call them yourself.

A previous post indicated that property was covered. I gues the BOT has a website we could consult ?

Dweeb

[yeti]

Its a catch 22 for condo buyers. If you transfer less then 800,000 baht you wont get the necessary FET certificate. If you transfer more ,they might withold 30% of it. Ive got my swift form filled out and ready to post today, but wont do it until this matter is cleared. Between that and the anticipated empty rental condos vacated by the visa runners whose 90 days run out, it might be a good idea to hold off on condo purchases. IMHO

BoT has been rather clear on this: money transferred to buy a property is not concerned by the new rule. Of course u could always call them yourself.

A previous post indicated that property was covered. I gues the BOT has a website we could consult ?

Dweeb

Yes, and the link to it was given in one of the first posts:

http://www.bot.or.th/

I also gave the the phone number to the hotline, when i wrote i called and they confirmed me that property was not concerned by the measure.

[kozi]

Just read this topic.

Trying hard not to panic. what do I do - Helllpppp

Oh my god, AHHHHHHHHHH Hu ahhhhhhhhhhhhhhh

[tempt]

Briefly what happened in one case when a customer of us bought a property.

Customer sends 12 M Baht to purchase condo, came in on Tuesday the 19th.

Reason of sending money. “Investment”

This was wrong, it should be “property purchase“ if filling out the forms in the country of sending the money.

Action taken:

Contact the banks head office,

Faxing copies of purchase contracts to the banks head office.

Now the bank can proof the funds are to purchase a property.

Done.

Result:

100% of the money was released 20 December at 3 PM, 24 hours later.

[jumnien]

You would think that property buyers would be ecstatic over the effect that the BOT actions and reactions have had. A weakening of the baht translates well when one is bringing in money for large purchases such as condos and houses. As usual, I'm astounded at the negativity of many farangs when something is done that improves their position so dramatically.

[mbkudu]

You would think that property buyers would be ecstatic over the effect that the BOT actions and reactions have had. A weakening of the baht translates well when one is bringing in money for large purchases such as condos and houses. As usual, I'm astounded at the negativity of many farangs when something is done that improves their position so dramatically.

That is a very good point, however, the way the government did it was not good. If the country had sound

economic principles to begin with, there would be no reason to use such a rash measure to prop up the baht.

I still have not read anywhere that is says wired money from overseas for property purchases will have 30%

frozen; it only says 'investment' money will be frozen. At the moment it seems as if they have forgotten the whole thing anyway, so it doesn't really matter after all. Just kidding! Poot len!

[jumnien]

You would think that property buyers would be ecstatic over the effect that the BOT actions and reactions have had. A weakening of the baht translates well when one is bringing in money for large purchases such as condos and houses. As usual, I'm astounded at the negativity of many farangs when something is done that improves their position so dramatically.

That is a very good point, however, the way the government did it was not good. If the country had sound

economic principles to begin with, there would be no reason to use such a rash measure to prop up the baht.

The last thing the Thai government is trying to do is prop up the baht; they are trying to prop up foreign currencies. How successful they will be remains to be seen. They are acting in a way that benefits most of us readers on this forum. Apologies to currency speculators in advance!

[kangeroo]

one thing i dont understand why would thai do all this at peak season ?

[Gaudente]

Use common sense.

Common sense stops at Thailand border.

[jumnien]

one thing i dont understand why would thai do all this at peak season ?

I assume you mean peak tourist season. These moves were to protect Thai industry and exports and have little to do with tourism.

[Gaudente]

I still have not read anywhere that is says wired money from overseas for property purchases will have 30%

frozen; it only says 'investment' money will be frozen. At the moment it seems as if they have forgotten the whole thing anyway, so it doesn't really matter after all. Just kidding! Poot len!

well, read here then:

http://www.bloomberg.com/apps/news?pid=206...&refer=asia

expecially this paragraph:

"The rules would have limited international investors to using 70 percent of their funds to buy Thai stocks. The requirements stay in effect on other investments, including bonds and property, Pridiyathorn said."

Edited December 21, 2006 by Gaudente

[Martin]

"The 'fear' with global investors/institutions for eventual future 'new' Thai steps will remain for a long time."

And what an excellent result that will be, if it comes about.

The world-wide spread of gambling driven by the epidemic of greed has now reached proportions that are highly dangerous to economic stability.

Pig-ignorant 'global investors/institutions' who felt they could make a killing by placing their money in the 'emergent market' that was Thailand in the mid-90s fuelled a crazy property bubble that caused a lot of hardship to many, many poor people here (and to some who were apparently-rich).

If those 'global investors/institutions' had been duly diligent in making their decisions, they would have seen that there were no longer any more productive enterprises to be developed in Thailand, as it already had as much factory employment as it had labour to offer.

Just below the surface, these 'global investors/institutions' (maybe we should call them "The Leesons") know that they are making bets on horses that they wot not of. So fearfulness kicks in when an unexpected event occurs, as has happened tis week.

The SET shenanikans were a prime example of "Panic first---there'll be time enough for thinking afterwards".

The BOT did something about currency speculation that was very wise. But the wise are often surprised by the irrational reactions of idiots.

I don't use the word 'idiots' lightly. Greed is idiocy, and globalized greed is idiocy spread worldwide.

If the King can see it, why can't all?

[Gaudente]

It's just the acts of people who :

-are incompetent

-have not a clue of how things are working

-and beyond, people who are disconnected from reality, because they were raised within thai high society.

It's the old guard, for whom Thailand is really the center of universe. They have missed the copernic revolution that occured a few hundred years ago !

At home, you are served like a king. People obey, not because you are brillant, or wealthy (it helps however), but just because you... are.

I completely agree.

[Gaudente]

Are we witnessing here the creation of a new North Korea or Burma? This is what I'm thinking when I see those measures

yes we are.

[Gaudente]

It may be here in this thread, but I'd ;ike to ask. Where can you invest in Thai equities? Is there a link available? Any suggested ones?

Thanks

here are the links of some Thai stock brokers:

http://inv4.asiaplus.co.th/abn/web/eng/index.jsp

http://www.seamico.com/eng/home.asp

and this is the link for Thailand Stock Exchabge

http://www.set.or.th

anyway I my advice is FORGET IT.

[Gaudente]

C’mon, is Homer Simpson running the BOT???

I wish he was put in charge.... would surely do a better job

[bendix]

So let's summarise.

Most of the whingers and complainers on TV said that the move was disastrous, not only for their personal selfish reasons but also from the point of view of Thailand's status in the eyes of international investors being destroyed.

Mmmmmmmmmmmmmmm

But the move was designed to weaken the Baht to protect exporters.

48 hours after it all happened, what's happened? The stock market is back to nearly where it was before this happened. The rulings have been reversed and everything is back to normal. Noone is getting 30% of their money withheld by the banks, and all is right with the world.

Oh . . . .and the Baht is now back over 36 to the US dollar.

Financial mismanagement? Or exactly the result the BOT and the authorities wanted? You decide.

[Gaudente]

Tarisa is on Bloomberg right now....she just stated "foreign investors are getting a 20% return on Thai Stock market considering currency appreciation".

Please, please, appoint Homer Simpson now, please

Edited December 21, 2006 by Gaudente

[Martin]

In post #169, 'bendix' said:

"48 hours after it all happened, what's happened? The stock market is back to nearly where it was before this happened. The rulings have been reversed and everything is back to normal. Noone is getting 30% of their money withheld by the banks, and all is right with the world.

Oh . . . .and the Baht is now back over 36 to the US dollar.

Financial mismanagement? Or exactly the result the BOT and the authorities wanted? You decide."

I would just add: "And the 'hot money' gamblers have been told that Bangkok is not a casino, where the chips have the picture of a monarch on them."

Good for the BOT.

As for the comparision with North Korea and Burma, it is risible. But this forum's rules preclude us from certain discussions that would be necessary in order to look further into the thinking that underpins all this.

[jumnien]

So let's summarise.

Most of the whingers and complainers on TV said that the move was disastrous, not only for their personal selfish reasons but also from the point of view of Thailand's status in the eyes of international investors being destroyed.

Mmmmmmmmmmmmmmm

But the move was designed to weaken the Baht to protect exporters.

48 hours after it all happened, what's happened? The stock market is back to nearly where it was before this happened. The rulings have been reversed and everything is back to normal. Noone is getting 30% of their money withheld by the banks, and all is right with the world.

Oh . . . .and the Baht is now back over 36 to the US dollar.

Financial mismanagement? Or exactly the result the BOT and the authorities wanted? You decide.

Bendix,

You are being far too broadminded for TV expat forum. In the future would you limit your posts to ferociously negative newspaper clippings from the Nation/Post. We will tolerate nothing but doomsday forecasts and utter gloom here.

[bendix]

Bendix,

You are being far too broadminded for TV expat forum. In the future would you limit your posts to ferociously negative newspaper clippings from the Nation/Post. We will tolerate nothing but doomsday forecasts and utter gloom here.

My sincere apologies to the forum. It won't happen again.

[Meerkat]

So let's summarise.

Most of the whingers and complainers on TV said that the move was disastrous, not only for their personal selfish reasons but also from the point of view of Thailand's status in the eyes of international investors being destroyed.

Mmmmmmmmmmmmmmm

But the move was designed to weaken the Baht to protect exporters.

48 hours after it all happened, what's happened? The stock market is back to nearly where it was before this happened. The rulings have been reversed and everything is back to normal. Noone is getting 30% of their money withheld by the banks, and all is right with the world.

Oh . . . .and the Baht is now back over 36 to the US dollar.

Financial mismanagement? Or exactly the result the BOT and the authorities wanted? You decide.

A drop from 736 to 691 is hardly back to normal – a 6% drop in any market is still front-page news (and it's off another couple of percent today as I write).

It remains to be seen how succesful the measures will be in depreciating the THB, but so far we're back to where we were less than a month ago. Measures to fiddle with FX rates rarely work, and usually do more damage than good. Looking at this particular case in point, whilst exporters indeed have a marginally cheaper baht now, their cost of raising capital has just gone up. Bond prices have dumped, thus pushing up the cost of raising capital by that method, and with “speculators” a dirty word again, it will be harder for companies to raise capital in the equity markets too. Incidentally, Thailand has been trying to increase the liquidity and role of the bond markets here; as recently as this week, foreign companies had been allowed to issue onshore for the first time. One hand isn't talking to the other (interesting that the head of the SEC was quoted as saying that the central bank underestimated the impact of restrictions on equities because “they did it without talking to us”).

Remember exactly why the THB has appreciated this year. The bulk of the rise isn't a rise at all, but a sink in the USD. Against most currencies, the rate has stayed relatively stable. Think too about how the SET has been undervalued compared to rival bourses in the region (a lower P/E ratio than Manila?), and that the perceived stability over the last few months has made the economy a better one to invest in. It's no wonder money was pouring in.

Khun Tarisa's comment that “Don't we want speculators to exit anyway?” would appear to show a complete misunderstanding of the role such people play in the market, increasing liquidity and thus making these markets more attractive for raising capital. And there's a certain irony in her quote that the measures will be retracted after volatility drops. The measures have pushed volatility through the roof!

So, as you say, to summarize:

A marginal drop in the THB.

Billions wiped off the value of equities and debt which leads to:

A serious loss of reputation for both the BOT and the Finance Ministry, leading to an increase in the country's risk-premium.

Which all leads to:

An increase in the cost of raising capital, stifling growth which was the exact opposite of what the measures were designed to do.

Where's the value?

[jumnien]

The value is hopefully a slight decrease in attractiveness to Thai investments that will make the lives of those of us who are already here a little less competitive for a while.

[hutchworld]

Don't believe everything you read in a newspaper. Don't worry, they're not taking anything out of your money transfers. Do you guys worry about the world spinning slower too?

So you mean that BOT just posted this on their website just for fun?

http://www.bot.or.th/bothomepage/General/P.../Eng/n5149e.htm

I'm one of those with questions rather than answers: If the inflow has been converted into Thai Baht prior to being wired into a Thai bank is the amount exempt of the 30% withholding? What is the maximum monetary transfer from a foreign country (e.g., UK) without incurring the attention of the government?

[OlRedEyes]

48 hours after it all happened, what's happened? The stock market is back to nearly where it was before this happened. The rulings have been reversed and everything is back to normal. Noone is getting 30% of their money withheld by the banks, and all is right with the world.

Oh . . . .and the Baht is now back over 36 to the US dollar.

Financial mismanagement? Or exactly the result the BOT and the authorities wanted? You decide.

The stock market bounced back to a certain extent. Question is on what volumes and who is buying, innit.

And who will be buying in the medium term.

Martin, you not one o' them survivalists from 'merika per chance?

[srisatch]

So..What, generally..or even precisely, IS One Baht "WORTH"...and to whom and when??

Asia Times article yesterday has this:

'On many technical measures, Bangkok-based market analysts say, the baht remains undervalued. Credit Suisse, an investment bank, reckons the baht's fair value against the dollar is 25.5, using its equilibrium exchange-rate model. Cem Karacadag, a director at Credit Suisse, is sticking by a forecast of 34 baht to the dollar by December 2007 - even with the new restrictive capital controls in place.'

Asia Times Dec 20

Full Article:

http://www.atimes.com/atimes/Southeast_Asia/HL20Ae02.html

[jumnien]

So..What, generally..or even precisely, IS One Baht "WORTH"...and to whom and when??

Asia Times article yesterday has this:

'On many technical measures, Bangkok-based market analysts say, the baht remains undervalued. Credit Suisse, an investment bank, reckons the baht's fair value against the dollar is 25.5, using its equilibrium exchange-rate model. Cem Karacadag, a director at Credit Suisse, is sticking by a forecast of 34 baht to the dollar by December 2007 - even with the new restrictive capital controls in place.'

Asia Times Dec 20

Full Article:

http://www.atimes.com/atimes/Southeast_Asia/HL20Ae02.html

Darn, that Cem Karacadag's got balls; I wouldn't forecast much past lunchtime today - December 2007, hah!

[autonomous_unit]

As far as I can tell, they set the new measures because they believed there was an impending speculator attack. They saw an unusual and severe rise in foreign capital inflow, and decided this was bad for Thailand. We all know the economy isn't that large by world standards, and could easily be pushed around by speculators with large pockets. Is it wrong for the BoT to try to manage the economy to the benefit of the country, rather than the benefit of foreign investors? Is it wrong for them to say, "we do not want currency speculators in our market"?

I think it is interesting to consider this question, independently of how well or how poorly the BoT executed on their intentions. I suspect that this forum is very divided on the underlying principle, much less on policy matters for trying to follow the principles...