Bank advises vigilance on foreign-exchange risks
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Bank of Tokyo-Mitsubishi UFJ sees opportunities for Thai companies to access a larger pool of resources and a bigger market through the Asean Economic Community while diligently managing their foreign-exchange risks.
“The opportunity is there. It depends on whether they seek resources or find new markets,” Angkana Meeploy, vice president for Asian business at BTMU Singapore, said yesterday.
Regulations and forex-risk management may pose challenges, particularly in Asean countries whose backgrounds are closed economies with capital-movement regulations, she told a seminar.
Thailand is not so strict, but Vietnam, the Philippines, Indonesia and Malaysia carefully control capital outflows, she said.
It may not be possible to hedge forex exposure via forward contracts in some Asian countries such as Vietnam with strict FX regulations.
“We suggest non-deliverable forwards for hedging. It may cost at least 10 per cent, but it can help companies hedge against FX risks,” Angkana said.
Non-deliverable forwards (NDFs) allow a company to manage FX fluctuations for non-convertible currencies that are restricted to trade for non-residents or where the FX forward market is too mature to trade. NDF settlements are made in hard currencies such as US dollars or Japanese yen, which are freely traded.
If investment is made in Asean countries, cross-border group finance may need to be explored thoroughly from intra-company funding and communications to supply financing, she said.
Many Thai firms and multinationals use internal sources of funds to finance their overseas investment.
Investors should hedge against risks in those foreign currencies that are not seen to be stable now, Angkana said.
Money markets are more volatile because of the euro-zone sovereign debt crisis and the fragile US economic recovery, said Roong Sanguanruang, chief market analyst for Asia at BTMU.
The baht is expected to strengthen slightly in six months on the back of Thailand’s current-account surplus and foreign portfolio inflows, she said.
BTMU forecasts the baht to stay in a range of 30.00-31.75 per US dollar and average 30.88 next quarter.
