More inflows to Thai capital market expected: TMB
The Thai stock and bond markets are expected to witness new investment inflows in the short term following the Bank of Japan's decisions last Friday, said TMB research.
"Expectations run high that other central banks in Asia including the People Bank of China and Bank of Thailand would boost the economy in a similar manner," it said.
The BOJ last week decided to keep the policy rate at the negative territory for the first time in its history.
TMB noted that a sharp drop in Japanese and US bond yields on Friday, minus 14 and 13 basis points respectively, indicated inflows into global bond markets. Thai treasury yield also fell by 19 basis points to 2.30 per cent.
Meanwhile, the decision boosted global stock markets. The Stock Exchange of Thailand Index also ended the month above the psychological level of 1,300 points.
At noon today, the SET index stood at 1,301.62 points.
Meanwhile, the BOJ's move would boost investment in Japan and this should lead to a higher demand for exports from Thailand, TMB said.
In 2015, Thai exports to Japan were valued at US$20 billion, or 9.4 per cent of total.
In a research note, Alvin Liew, UOB economist, admitted that the markets did not expect the BOJ to ease in January. The monetary policy is expected to stay intact in the first half of this year before the central bank adds monetary stimulus in the second half. There will be seven more policy rate meetings this year in Japan.
"If crude oil prices dip further into the year, we should expect more stimuli from BOJ earlier rather than later," Liew said.
HSBC economists noted that the effects of negative rate policy will be small at first, as only a small portion of financial institutions’ reserves will be subject to the negative rate. Yet, the main purpose of policy change is the signalling effect.
"Contrary to the BOJ’s hopes, we think the negative interest rate policy will have a limited impact on the real economy (though it is likely to stoke asset price inflation). Instead, the signalling effects of the new policy are much more important, as is the role of marginal negative
rates in spurring currency weakness (or at least limiting JPY appreciation pressures)," they said.
HSBC expects more rate cuts in Japan, by another 20 basis points each at the July and November policy meetings, taking the marginal deposit rate to -0.5 per cent by year-end.
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