Investors told to focus on long-term, warned of forex risks
The Bank of Thailand is warning investors to take precautions against currency risks after the US economic situations contributed to fluctuations in the baht exchange rate by as much as 10 per cent, though the central bank itself insists it is well able t
Thai investment abroad, in the first eight months of 2013, touched US$5.5 billion (Bt170 billion), down from $7.8 billion in the same period last year, and tax measures are being considered to make it easier for Thai companies to be more active overseas.
In all of 2012, Thai investment abroad totalled $12.7 billion.
BOT Deputy Governor Pongpen Ruengvirayudh said volatility in the baht-dollar exchange rate reached a high of 10 per cent this year mainly because of the US economic crisis. But the movement of the Thai currency was in line with its regional peers.
She warned investors not to expose themselves to too much risk by taking only a shortsighted view at a time with market volatility is likely to resume whenever the United States changes its policies.
Investors should consider the likely impacts of such volatility and their own capacity to absorb them, she said.
Money markets will likely see fluctuations but it is difficult to predict these precisely, as they depend largely on the United States’ economic problems. One such problem looming early next year is a renewed political battle over the US debt ceiling, which has to be grappled with in February.
But despite the market volatility, the BOT says it stands ready to keep the baht stable. Although Thai investment abroad would speed up capital outflows, Pongpen believes investors should overlook short-term volatility and plan for the long term, as offshore investment would help diversify risks and promote long-term growth.
Enterprises in the energy and manufacturing sectors have already established themselves overseas to lower production costs.
Much of Thailand’s investment has gone into Singapore, as that country has laws promoting the inflow of foreign capital.
Here at home, the Fiscal Policy Office is studying tax measures to reduce the costs of Thai companies’ overseas investment, including direct investment and acquisitions. This study is expected to be finalised soon.
