Forex rules draw mixed views
THERE ARE DOUBTS over how much effect the Bank of Thailand's relaxation of foreign-exchange regulations will have on the value of the baht, but there are some positive indications that the measures will facilitate overseas investment.
The new regulations have received approval in principle from the Finance Ministry.
Vallop Vitanakorn, vice chairman of the Thai National Shippers’ Council, said the measures would provide more incentive for local companies to invest overseas, and that would lead to an outflow of US dollars, consequently depreciating the baht.
However, it would take some time for business operators to act on the new measures.
“The consecutive cuts of the policy interest rate and the additional measures have so far pushed the baht further down to 33 per dollar, but I doubt it will [weaken] any further in the coming quarter. The depreciation will help close the gap in exchange-rate competitiveness, but the currency is still on average 7 per cent stronger than [those of] our trade partners in the region,” he said.
“Operators will need time to consider the new measures, while the depreciation of the baht also depends on the main trading currency [US dollar], which is on a downward trend from the poorer-than-expected US economic numbers in the first quarter,” Vallop added.
The chief executive officer of Ch Karnchang, Plew Trivisvavet, said the central bank’s relaxation of the rules for expanding Thai investment in other countries would encourage more investment of this type.
“We are currently investing in Laos and Myanmar, and these new measures will help us cut the cost of expansion overseas,” he said.
Tim Leelahaphan, Maybank Kim Eng Securities (Thailand) economist and assistant vice president of its research department, said the BOT anticipated that the new measures would make the baht weaker, but the securities firm expected that the measures would have only a “limited impact” on the Thai currency.
“You can open more room but it does not guarantee that people will move into it.
“Do non-residents really have a need for loans from Thai commercial banks, and do residents really want to purchase immovable properties abroad? And if yes, where? The impact remains to be seen,” he said.
He said Maybank’s regional team had changed its prediction for the baht to be trading at 33 per dollar by the end of the third quarter to around 33.2 after the policy-rate cut on Tuesday, but the team now had decided to maintain its earlier prediction after the new measures were revealed yesterday.
Pimonwan Mahujchariyawong, deputy managing director of Kasikorn Research Centre, said many business operators were looking to expand overseas at the moment and the central bank’s new measures were in line with that trend.
Increase pace of depreciation
The measures would also increase the pace of the baht’s depreciation, but even so, Kasikornbank still believes that the currency will probably be in the 34-per-dollar region by the end of the year. Pornsilp Patchrintanakul, adviser to the Board of Trade of Thailand and Thai Chamber of Commerce, said the relaxation was a positive measure that should help weaken the baht and benefit the export sector.
“Both the policy-rate cut and the central bank’s relief measure on capital inflows should stimulate economic growth, as the export sector will perform better from a weakening baht, while domestic investment will also be stimulated,” he said.
