Post-Brexit flow of money into Thai stocks & bonds
US$2 billion flowed into Thai stock market this year, half in July alone. For bond market, $3 billion poured into country this year.
US$2 billion flowed into Thai stock market this year, half in July alone. For bond market, $3 billion poured into country this year.
INTERNATIONAL ECONOMY & FINANCE
Post-Brexit flow of money into Thailand's stock & bond markets
5/08/2016
Pathom Sangwongwanich
Increased capital inflows into Thailand's equity and bond markets have been apparent since Britain's Brexit vote to leave the EU in late June.
The shock Brexit vote added to global economic uncertainties and raised expectations that: 1. the central banks of major economies would launch further stimulus measures to shield their economies from spillover effects, and 2. push back the US central bank's (Federal Reserve's) rate hike prospects.
BAHT'S RISE
The baht rose 3.23% in value, with volatility of 4-5% since the beginning of the year.
A strong baht on Thursday hovered at 34.92 to the US dollar after touching a one-year high (peak) of 34.72 on Monday.
CENTRAL BANK MEASURES TO CURB BAHT'S STRENGTH
The Bank of Thailand (BOT), Thailand's central bank, has prepared measures to deal with capital inflows and curb the baht's strength.
Companies engaged in international trade have been urged to hedge against foreign exchange risks.
Exporters and importers account for a combined 20-30% of foreign currency hedging activities.
FOREIGN INVESTOR HOLDINGS LOW & STABLE
Despite the persistent offshore fund inflows, foreign investors' holdings in Thai bonds account for 8-9%, compared with 30-40% in other countries.
Holdings in Thai equities has hardly changed and stands at 27%.
NEW TC LICENSES TO EASE CROSS-CURRENCY TRANSACTIONS WITHIN BIG COMPANIES
In the meantime, the central bank will soon award treasury -centre (TC) licences to two companies, while more than a dozen firms have enquired about licence applications.
TC licenses will make money exchange between currencies (cross-currency transactions) easier for companies.
With a TC licence, companies can: 1. pool financial liquidity from firms in their business group globally without seeking special approval from the central bank for each cross-currency transaction, or 2. extend inter-company loans to subsidiaries with terms of more than one year, increasing the business group's cash utilisation efficiency.
Two large companies, the PTT subsidiary PTT Exploration & Production and Thai Union Group Plc, the world's biggest exporter of canned tuna, are the latest companies to obtain TC licences.
Fourteen companies have sought TC licences from the central bank so far, she said, adding that six of them are Thai and the remaining eight are overseas firms.
http://www.bangkokpost.com/business/finance/1053205/capital-influx-unabated
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