Thailand yesterday moved to relax rules on capital outflows and increase scrutiny of fund flows into bonds to help cool a currency rally that threatens its economic recovery from the COVID-19 pandemic.
The Bank of Thailand moved forward measures that were supposed to begin early next year, most of which are now take effect from the end of this month. The rules would make it easier for Thai citizens to move money overseas and invest in foreign assets, and to hold foreign currency in Thai banks. It would also require the registration of local and overseas bond investors.
“Following the US elections and positive news on COVID-19 vaccine development, investors have turned toward investing in emerging markets, including Thailand,” the bank said in a statement yesterday.
The situation has “resulted in strengthening the baht quickly and can impact economic recovery,” it said.
The registration of bond investors “will allow close monitoring of investor’s behaviors and thereby enable the implementation of targeted measures in a timely manner,” it said.
The move follows a central bank assessment earlier this week that the baht’s recent rapid gains could affect the nation’s “fragile” economic recovery. The government has called on the central bank to restrain the baht to protect exports.
The baht gained as much as 0.5 percent to 30.276 to a US dollar after the bank’s announcement, trimming its losses this week to 0.4 percent.
“The issue here is that local investors have a very strong home bias. Making it easier to invest overseas may not actually encourage them to do so,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group.
The central bank will also continue to resort to direct intervention in foreign-exchange markets, “but they need to be careful as they are skirting close to meeting the US Treasury’s three criteria for currency manipulation,” he said.
The baht has been the second-best performer in Asia this month after foreign investors turned net buyers of almost US$2.4 billion of bonds and stocks as appetite returns for riskier emerging-market assets amid a weak dollar. The Thai currency had rallied 8.8 percent from this year’s low in April, hitting a 10-month high last week.
With its borders closed to most visitors, Thailand is betting on trade to minimize the blow from the pandemic.
The government is to focus on supporting exports, which have shown signs of revival, as its only source of external revenue, Thai Minister of Finance Arkhom Termpittayapaisith has said.
The measures announced yesterday include:
‧ Allowing free deposit and transfer of funds in foreign currency for Thai citizens.
‧ Residents can use foreign currency deposit transactions to diversify investments in overseas equities and gold denominated in US dollars.
‧ Raising overseas investment limit for retail investors from US$200,000 to US$5 million per year.
‧ No investment limit in foreign securities through local financial institutions, such as brokerage firms and asset management companies.
‧ Allows local listing of foreign securities, such as exchange traded funds that track foreign securities
The steps would help create an ecosystem for the foreign-exchange market, balancing capital flows and increasing market stability, Bank of Thailand Assistant Governor Vachira Arromdee said.
“The measures should work in theory, but until we see more details it is hard to tell how effective they will be,” said Mitul Kotecha, senior emerging-market strategist at TD Securities in Singapore. “Previous measures to increase outflows have had limited impact. To be effective there also has to be strong demand for FX deposits and to push money overseas, which is not guaranteed.”
With the speed cryptocurrency is emerging as the millennial generation’s alternative asset of choice in India, it is hard to imagine that just two years ago a couple of blockchain pioneers were briefly in police custody. Sathvik Vishwanath and Harish BV, cofounders of a then five-year-old start-up, were arrested in late 2018. No, they had not pulled off a shady initial coin offering. Their “crime” was that they put up a kiosk in a mall in Bangalore where customers could swap bitcoin, ether or ripple for cash or vice versa. That was the whole point of unocoin, their crypto token exchange.
A Chinese factory owned by South Korean semiconductor giant SK Hynix Inc yesterday halted operations after a plant worker was found to have an asymptomatic infection of COVID-19, Xinhua news agency reported. The South Korean worker based at the plant in Chongqing since February had departed on Thursday for South Korea, Xinhua reported. He was tested at Incheon Airport in Seoul and confirmed positive for COVID-19 on Saturday, it reported. All factory staff as well as staff and recent guests at the hotel where the worker lived have been isolated and given nucleic acid tests, the agency said. “We’re cooperating with the local government
FIVE NEW FABS: An acquisition of Siltronic would boost GlobalWafers’ market share from 17 to 30 percent, easily surpassing Japanese rival Sumco’s 25 percent GlobalWafers Inc (環球晶圓) yesterday said it is in final talks to acquire Germany-based Siltronic AG in a 3.75 billion euro (US$4.5 billion) deal, which might help it compete with its closest rival Sumco Corp of Japan. The acquisition would be the fifth for GlobalWafers since 2008, as it has grown to become the world’s No. 3 supplier of silicon wafers through such deals. GlobalWafers, which has a 17 percent market share, would see its market position greatly elevated to 30 percent when combined with Siltronic’s 13 percent, according to a presentation Siltronic gave to its investors at a quarterly conference in August. Sumco
A year of crisis for the lira has kept people in Turkey buying gold at a record pace. Now the appetite for more bullion risks becoming a drag on the currency just as a rally struggles to regain momentum. In the two weeks after Turkish President Recep Tayyip Erdogan cleared out the leadership ranks blamed for failing to stabilize the lira and draining reserves, Turkish retail investors and firms added US$2.2 billion to their gold holdings, taking them to US$36.4 billion, or almost triple the total last year, Turkish central bank data showed. People are not relenting in their zeal to own