Bank of Thailand to prevent inflow of “hot money” from abroad

[webfact]

Central bank to prevent inflow of “hot money” from abroad

 

 

BANGKOK: -- The Bank of Thailand is ready to tighten up measures to prevent the inflow of “hot money” or short-term investment from abroad for speculation purpose.

 

BoT deputy governor for monetary stability Methee Supapong said the central bank would not ease the measures and was closely monitoring the inflow of short-term investment from abroad for speculation or for investment in the central bank’s short-term bonds.

 

He disclosed that the central bank had reduced the issuance of bonds with 3-month and 6-month maturity period to prevent foreign investors from taking advantage of the strengthening of the baht to make short-term investments such as buying the short-term bonds.

 

The amount of bonds being reduced was estimated at about 71 billion baht.

 

Full story:  http://englishnews.thaipbs.or.th/central-bank-prevent-inflow-hot-money-abroad/

 

-- © Copyright Thai PBS 2017-05-30

[Thechook]

Right, so come and invest in Thailand but don't expect us to give you a return.

[simoh1490]

6 minutes ago, Thechook said:

Right, so come and invest in Thailand but don't expect us to give you a return.

There's a big difference between hot money flows and any investment in Thailand. The last time BOT tried to take similar measures they ended up putting a short term tax on hot money flows to ensure the funds were not just opportunistic and really were investments....expect to see similar again.

[Bill Miller]

2 hours ago, simoh1490 said:

There's a big difference between hot money flows and any investment in Thailand. The last time BOT tried to take similar measures they ended up putting a short term tax on hot money flows to ensure the funds were not just opportunistic and really were investments....expect to see similar again.

Can anyone explain what the "big difference " is?

I thought a bond issue was a means to raise capital for some reason, and the interest was a "reward" for allowing use of your money.

Are the "hot money " investors going to manipulate the bond market, short sell, or what?

How does Thailand lose in this scenario?

[simoh1490]

Just now, Bill Miller said:

Can anyone explain what the "big difference " is?

I thought a bond issue was a means to raise capital for some reason, and the interest was a "reward" for allowing use of your money.

Are the "hot money " investors going to manipulate the bond market, short sell, or what?

How does Thailand lose in this scenario?

An investment in Thailand involves bricks and mortar, payrolls, staff and exports, all of which have a time line measured in many years.

 

Hot money is brokers, banks, finance houses and investors looking to make a quick often opportunistic return as a result of their large cash stockpiles.

 

How Thailand looses is that overseas investors must convert the currency of their hot money into Thai Baht, they will likely sell USD and buy THB in order to buy their bonds or invest in the SET. That will cause the value of THB to strengthen and is one of several factors that have caused THB to be so strong. How Thailand looses is their currency becomes so strong that Thai exports become prohibitively expensive hence the country exports less.

[yellowboat]

Controlling rather than managing the nature of economics is a bad thing.   The Euro and the rice pledge are examples of too much interference with fundamentals of economics.

[maewang99]

the words 'strong' and 'Baht' are so incongruous I can't see how they can ever be used together.
 

and then there is this today.... in the other farlang newspaper:

'The BOT is tracking OFFSHORE INFLOWS'... 

 

as opposed to OFFSHORE OUTFLOWS... which are normal.. and quite welcome thank you. 

 

Edited May 30, 2017 by maewang99

[simoh1490]

5 minutes ago, maewang99 said:

the words 'strong' and 'Baht' are incongruous.    
 

it's been a managed float...... since 1997....... that only varies between very very very weak.... and very very weak. it hasn't been anywhere near 'strong' in decades.

 

:-)

and in today's other farlang newspaper is the headline:

'The BOT is tracking OFFSHORE INFLOWS'... 

 

as opposed to OFFSHORE OUTFLOWS... which are normal.. and quite welcome thank you. 

 

So you think the last time the Baht was strong was when it was pegged to USD?

[Ramen087]

Export economies tend to like their currency a bit weaker, making the products to be shipped to other nations cheap relative to the competition. Thailand is an export economy.  

[Redline]

2 hours ago, simoh1490 said:

An investment in Thailand involves bricks and mortar, payrolls, staff and exports, all of which have a time line measured in many years.

 

Hot money is brokers, banks, finance houses and investors looking to make a quick often opportunistic return as a result of their large cash stockpiles.

 

How Thailand looses is that overseas investors must convert the currency of their hot money into Thai Baht, they will likely sell USD and buy THB in order to buy their bonds or invest in the SET. That will cause the value of THB to strengthen and is one of several factors that have caused THB to be so strong. How Thailand looses is their currency becomes so strong that Thai exports become prohibitively expensive hence the country exports less.

So, they want to control who buys how much and when?

[simoh1490]

Just now, Redline said:

So, they want to control who buys how much and when?

That's one interpretation, a more appropriate one is that they don't want to be a global magnet for investment money that will disappear on a whim and who can blame them.

[Redline]

4 minutes ago, simoh1490 said:

That's one interpretation, a more appropriate one is that they don't want to be a global magnet for investment money that will disappear on a whim and who can blame them.

True enough.  There are always financial controls available.  China uses them with some degree of success

[WhizBang]

And here I thought they were referring to money gained from illegal activities.  In other words, money laundering.  Who knew legal money could be 'Hot'.

 

[simoh1490]

Just now, WhizBang said:

And here I thought they were referring to money gained from illegal activities.  In other words, money laundering.  Who knew legal money could be 'Hot'.

 

It's hot in that it rarely stays in one place for long, a very common term these days.

 

BUT, illegal money in Thailand is yet another dimension to the strength of THB, it's still money that gets exchanged to buy THB hence another root cause of THB strenthening.

[salavan]

4 hours ago, simoh1490 said:

An investment in Thailand involves bricks and mortar, payrolls, staff and exports, all of which have a time line measured in many years.

 

Hot money is brokers, banks, finance houses and investors looking to make a quick often opportunistic return as a result of their large cash stockpiles.

 

How Thailand looses is that overseas investors must convert the currency of their hot money into Thai Baht, they will likely sell USD and buy THB in order to buy their bonds or invest in the SET. That will cause the value of THB to strengthen and is one of several factors that have caused THB to be so strong. How Thailand looses is their currency becomes so strong that Thai exports become prohibitively expensive hence the country exports less.

then the baht will loose value

[timendres]

Market manipulation. By bureaucrats. So many examples of this leading to positive results.... not.

[simoh1490]

21 hours ago, salavan said:

then the baht will loose value

Good logic but sadly no! The problem is that the combined flow of funds into THB, from a combination of all sources, is far greater than what is needed to keep THB level. So a downturn in exports alone hurts GDP and Thai businesses but doesn't alleviate the upward pressure on THB value.

[lkn]

On 5/30/2017 at 3:33 AM, Bill Miller said:

Can anyone explain what the "big difference " is?

I thought a bond issue was a means to raise capital for some reason, and the interest was a "reward" for allowing use of your money.

Are the "hot money " investors going to manipulate the bond market, short sell, or what?

How does Thailand lose in this scenario?

The article seems borderline misleading.

 

If BOT issues a bond (of their own) it basically means the money gets deposited with BOT and is therefore not part of the general economy, so effectively they are limiting the money supply by issuing a bond.

 

As we know, limiting a resource is indirectly increasing demand, and increased demand leads to higher prices. In this case, we are talking about the price of the Thai baht.

 

What they are saying in the article is that they are limiting the number of short-term bonds. However, it is important to remember that 3-6 months ago, they also issued bonds, which are reaching their maturity now. They are limiting number of bonds relative to what they did last time, so the bonds they issue now are not really “new” per se, it is just a renewal of the bonds that reach maturity, but this time, they will not renew all of them.

 

So another way to look at this is that BOT will increase the money supply with an estimated 71 billion baht.

 

I don’t see how this has anything to do with “hot” money. It’s basically just BOT doing their job in trying to keep the currency stable: They think the Thai baht has gotten too strong, so they increase the money supply to weaken it.

[Bill Miller]

On 6/3/2017 at 1:41 PM, lkn said:

The article seems borderline misleading.

 

If BOT issues a bond (of their own) it basically means the money gets deposited with BOT and is therefore not part of the general economy, so effectively they are limiting the money supply by issuing a bond.

 

As we know, limiting a resource is indirectly increasing demand, and increased demand leads to higher prices. In this case, we are talking about the price of the Thai baht.

 

What they are saying in the article is that they are limiting the number of short-term bonds. However, it is important to remember that 3-6 months ago, they also issued bonds, which are reaching their maturity now. They are limiting number of bonds relative to what they did last time, so the bonds they issue now are not really “new” per se, it is just a renewal of the bonds that reach maturity, but this time, they will not renew all of them.

 

So another way to look at this is that BOT will increase the money supply with an estimated 71 billion baht.

 

I don’t see how this has anything to do with “hot” money. It’s basically just BOT doing their job in trying to keep the currency stable: They think the Thai baht has gotten too strong, so they increase the money supply to weaken it.

Ah, so desu. That makes more sense to me.

Thanks.