BOT unveils new liberalisation measures in bid to control baht's appreciation
The Bank of Thailand (BOT) on Friday liberalised Thai investments in foreign securities and the holding of foreign currencies in a bid to rein in the strengthening baht.
Under the new BOT measures, Thais are allowed to freely open foreign currency deposit accounts (FCD) and can freely make transactions between FCD accounts, BOT assistant governor Vachira Arromdee said on Friday.
The measures will enable exporters to effectively manage liquidity and foreign exchange risk.
Vachira said that the US presidential election outcome and the progress of the Covid-19 vaccine development have strengthened confidence in the global economy. This has resulted in "renewed inflows into emerging market economies, including Thailand".
"The rapid appreciation of the baht may affect the fragile recovery of the Thai economy," Vachira said.
The BOT has closely monitored and intervened in the market as necessary to limit excessive currency volatility. In addition, to further mitigate pressures on the currency and to address structural issues in the Thai foreign exchange market, the BOT has come up with additional measures, Vachira said.
Residents are allowed to conduct FCD transactions electronically, which reduces transaction costs. FCD accounts may also be used for residents to diversify investment into assets denominated in foreign currencies, such as foreign equities and gold denominated in US dollar, the central bank said.
The BOT has relaxed regulations regarding investment in foreign securities. These include increasing investment limits and expanding eligible financial products, in order to expand investment options for residents and enhance portfolio diversification.
The investment limit for retail investors has been increased from $200,000 per year to $5 million per year. Also, there is no investment limit in foreign securities through local financial institutions such as brokerage firms and asset management companies.
There is also no investment limit in foreign assets for investors regulated under the Securities Exchange Commission (SEC).
Foreign securities such as Exchanged Traded Funds that track foreign securities can now be listed in Thailand.
Investors in Thai bonds will be subject to "Bond pre-date registration". Pre-registration will upgrade the bond surveillance system, which will allow close monitoring of investor behaviour and thereby enable the implementation of targeted measures in a timely manner, the BOT said. This registration is in line with practices in South Korea, Malaysia and Taiwan, the central bank added.
The latest measures are a part of the comprehensive FX Ecosystem Development Plan that the Ministry of Finance, the SEC and the BOT are together advancing in order to address structural problems in the foreign exchange market in a sustainable manner, the central bank said.