Thailand ‘unlikely to be hit by Fed rate hike’
Emerging markets will see capital outflows after the US Federal Reserve (Fed) raised its key interest rate for the first time in 2016 by 25 basis points to 0.75 per cent, many experts believe.
But it will have less impact on Thailand as foreign investors here mostly hold Thai bonds totalling US$18 billion, according to Kobsidthi Silpachai, head of Capital Markets, Kasikornbank.
However, there could be an impact on the baht and the central bank has revised upward its 2017 foreign exchange target by 50 basis points to Bt36.50 against the US dollar.
He said the baht will not weaken as much against the US dollar as other regional currencies because Thailand has a current account surplus.
Yesterday, the baht closed at Bt35.77 to the dollar, weakening from Bt35.62 on Wednesday.
Banthoon Lamsam, chairman of the board and chief executive officer of Kasikornbank, added that the weakening of the baht following the Fed rate hike would benefit Thai exporters, although the capital outflow situation should be watched.
SCB Economic Intelligence Centre (EIC) expects the Bank of Thailand to maintain the policy rate of 1.5 per cent until the end of next year as the volume of foreign capital outflows is not much.
Thailand’s strong balance sheet, including a current account surplus at 8 per cent of GDP and international reserves at 57 per cent of GDP are supportive factors for the BOT in maintaining the policy rate in order to support the domestic economic recovery.
EIC expects the baht to reach 37 to the dollar by the end of 2017.
Meanwhile, yesterday Asian shares outside Japan and currencies struggled after the Fed’s rate hike and hinted at the risk of a faster pace of tightening than investors were positioned for.
Thailand’s SET Index yesterday closed at 1,519.65, dropping 1.6 points from Wednesday with trade valued at Bt49.53 billion.
The Straits Times Index or STI index yesterday closed at 2,930.77, dropping 23.29 points from Wednesday.
Malaysia’s KLCI Index yesterday closed at 1,637.0, dropping 6.30 points from Wednesday.
The Hang Seng Index yesterday closed at 22,059.4, sliding by 397.22 points from Wednesday.
Gold prices yesterday fell to a new low in more than 10 months as the US dollar surged after the Fed’s rate hike.
