Baht What up with Dat?????

[Aardvark]

The Article speaks for itself .... http://www.perthnow.com.au/business/mar ... 6563248762

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Interesting article, no surprises

[bumper]

Well we sure are not the only ones talking about it these days:

Bangkok PPost

BoT told to cut key policy rate

Published: 27 Jan 2013 at 15.26
Online news: Local News

The Bank of Thailand (BoT) should consider cutting the repurchase rate to curb the foreign direct investment inflow, Pongsak Assakul, chairman of the Thai Chamber of Commerce, said on Sunday.

Mr Pongsak said the persistent baht appreciation was caused by investment inflow to make short-term profit by foreign investors, not long-term investment.

As the overseer of monetary policy, the central bank should come up with necessary measures to block such short-term investment inflow, he added.

One measure is to cut its key policy rate to prevent the baht currency from becoming too strong and lowering the trade competitiveness of Thai exporters, which have already been severely affected by the 300 baht daily minimum wage hike, he said.

Mr Pongsak said TCC will reassess the impact of the strong baht next week.

Former finance minister Thirachai Phuvanatnaranubala said on Wednesday that the ongoing appreciation of the baht has created a problem for small and medium enterprises (SMEs),

SMEs had already been affected by the government’s 300-baht daily minimum wage nationwide policy, which took effect on Jan 1, and the stronger baht would worsen the situation, he said.

Mr Thirachai believes the strong baht will become another main risk factor for the Thai economy this year as it could further trim the country’s exports.

The ex-finance minister is confident that the BoT is capable of overseeing the value of the baht.

But intervention in the money market to weaken the currency would increase losses to the central bank.

Moreover, the intervention could be made only at a certain level, he said.

Regarding a call for the BoT to cut the repurchase rate to curb foreign direct investment inflow, Mr Thirachai said the measure would lead to an expansion in domestic lending.

It could also lead to problems of high inflation and household debt, he added.

Payungsak Chartsuthipol, chairman of the Federation of Thai Industries (FTI) said on Jan 19 that the central bank should intervene to ensure the baht moves in line with other regional currencies.

Mr Payungsak was concerned that the strong baht would affect the trade competitiveness of Thai manufacturers, particularly exporters.

The baht has appreciated by 1.2% against the dollar since the start of this year. It gained 3.1% in 2012 after advancing 5% in 2011. The Thai currency has been the second strongest performer in Asia so far this year, behind the Malaysian ringgit which has gained 1.8%.

Finance Minister Kittiratt Na-Ranong conceded that if the baht appreciated much more, it could affect the competitiveness of Thai exports. He contends that the gains do not reflect real demand for the baht.

However, demand is expected to remain very high as foreign funds pour into the country's stock and bond markets in search of higher returns than in developed markets.

Average daily turnover on the Stock Exchange of Thailand has exceeded 50 billion baht since the start of this year, compared with an average of 32 billion in 2012. Foreign funds account for 20% of trade on the local stock market.

It is the duty of the central bank to oversee the short-term baht fluctuations and rapid inflows and outflows of foreign investment, said Mr Kittiratt, who is also deputy prime minister for economic matters.

Central bank governor Prasarn Trairatvorakul admitted that the baht fluctuation was caused by foreign capital inflows to the local bond and stock markets.

He also admitted that there were signs of short-term profit-taking by foreign investors.

However, the baht's movement was in line with those of other currencies in the region and therefore no intervention was taking place at this time, Mr Prasarn said.

Thiti Tantikulanan, head of the capital markets business division at Kasikornbank, projected the baht would appreciate to 29.50 by mid-2013 and further strengthen to 29 baht by the end of the year.

[JimboPSM]

Some of us have been talking about it for quite some time so (using a cooking show analogy) here is a post I made earlier (actually back in September 2010).

As can be seen from this old post, nothing much has really changed, the points are pretty much just as valid today as they were then:

Much of the appreciation of the THB continues to be described in official circles as a result of “Capital Inflows” - this in my view is a misnomer; it does not appear to me that it is not “Long Term Capital” that is flowing in, but short term “Hot Money” in search of the highest short term investment return available.

The problem with “Hot Money” is that sooner or later it flows back out again as and when higher short term investment returns are available elsewhere.

As we have seen so many times in the west, there is a dangerous herd mentality in the investment world which follows the latest fashions - which is why we have seen so many kinds of investment bubbles grow and then burst and we keep going through economic boom and bust cycles.

In the current world economic climate Asia is very much in fashion as it appears to have (so far) largely dodged the economic bullets that have been flying around – however it is very doubtful they will be so lucky with all the ricochets.

The western markets on which Asia still greatly depend will be forced sooner (Europe) or later (USA) into austerity mode – although Asia is not as wholly dependent on western markets as it once was it is a long, long way from being disconnected from them.

It is noticeable how the rhetoric about the value of THB differs between the government and the BoT on the one side and private industry on the other – but when there is so much smoke and there are so many mirrors who really knows, and to what degree, who may be right and who may be wrong?

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Actually that POST from way back when, has happened several times, since then.

I would thing things are actually more severe now then they were back in 2010. The SET was scaring 1,470 today. The magic prediction is for 1,500. I pulled out when I had enough to start the hobby farm. The market looked over heated to me then. Hindsight being 20/20 I could have done much better.

Why more severe the stocks Are now trading at over 20 X P.E Bubble territory, unless you bought years ago. Might be worth taking a very close look at. The guys I know that are still investing are selling off a bit now. Only by solid companies with good dividends. They bought in time frames that they should be OK.

When that money flows like it is now that's a risk on climate. When things look real shaky, that money heads back to the U/S dollar for what reason I have no idea. The Set drops the baht drops. It's a matter of where is the best game in town.

They have raised the minimum wage by 30%. They have incurred more debt then they have ever had before.

On the individual side of life, they have made loans on houses and cars along with credit cards. To a huge amount of people who can't afford to pay the money back. Does that sound familiar to the U.S. housing market?

All I can say so far they have been like teflon. nothing sticks and they just go on. Will the Thai luck hold, I don't know. I read a book on the 97 crash. They were like Teflon in that as well. When the hammer finally fell it was days not months and years. Baht went from 26 to 56 in super quick time.

Things Are different now then 97 it's the west that is in trouble not the east. So will the teflon be scratched?

I don't know but it is possible. as was mentioned there were a lot of vacant half finished buildings all along that set there for years ring road and that wasn't that long ago.

I saw that the dollar went up a bit today and I don't have clue as to why.

Anyway that is what I see that has changed.

[Zama]

The Nation Today

Rate cut 'may not tame baht'

The Bank of Thailand apparently prefers macro-prudential measures to a cut in interest rates or capital controls, as have been suggested by some policy-makers and business operators, as a way of keeping the baht's appreciation under control.

BOT Governor Prasarn Trairatvorakul yesterday insisted that the benchmark interest rate was not the only factor attracting capital inflows. A cut in the policy rate may not therefore deter inflows, as in the case of Hong Kong, he said, adding that rate cuts could also have negative repercussions, including a reduced incentive to save.

Late last year, the Hong Kong dollar came under speculative attack and the authorities there were expected in some quarters to end a 29-year-old peg to the US dollar, even though the benchmark interest rate at the time was as low as 0.50 per cent.

The Thai policy rate has stood at 2.75 per cent since October 17.

"The policy rate is a tool towards financial stabilisation. The Monetary Policy Committee takes into consideration many factors in deciding the policy rate," Prasarn said, pointing out that the central bank also had other tools to manage the foreign-exchange rate.

The challenge now is how to exercise the right policy at the right time, he added.

Global funds have poured more than US$4 billion (about Bt120 billion) into Thai bonds and stocks this month, boosting the local currency to a 17-month high on January 21.

Thanks to Bt15 billion worth of foreign net buys, the SET Index hit a 16-year high at 1,472 points, while the baht weakened to 29.97 per US dollar at 3.08pm yesterday, on intervention speculation.

The unit weakened in line with a report of lower exports, with the Commerce Ministry estimating last year's export growth in dollar terms at only 3.12 per cent.

Despite yesterday's move in the other direction, the baht has advanced 2 per cent so far this year, the biggest rise apart from the Indian rupee among Asia's 11 major currencies, according to Bloomberg.

Prasarn insisted there had been no speculation on the baht in the past few weeks.

Finance Minister Kittiratt Na-Ranong said Thailand's trade and balance-of-payments surpluses naturally attracted capital inflows, and that nobody had heeded his advice on the perils of a high interest rate on the foreign-exchange rate.

He said he did not, however, want to say any more on the issue, as it could be interpreted as intervening in the central bank's operations.

He has sympathy with business operators, but in this situation there are also winners, namely those who have to spend less on imports, he added.

Meanwhile, Prasarn refrained from commenting on whether the BOT might impose capital controls akin to the measures taken in 2006.

He merely insisted that the central bank would continue to monitor the situation closely to maintain financial stability.

During a period of great uncertainty, the implementation of tools must be flexible and correspond to the prevailing circumstances. Importantly, it must benefit the country, he added.

The BOT chief also insisted that the central bank was ready to relax as many rules as possible to mitigate the negative impacts of the baht's appreciation.

The Federation of Thai Industries (FTI) earlier urged the central bank to lengthen the period exporters can hold on to their foreign-currency income. With the recent baht surge, converting foreign currency now for fewer baht means making a loss.

"We have relaxed the rules," Prasarn said. "The holding period, now at one year, could be extended if they want. We're ready to discuss this. Some of our neighbours are experimenting with an unlimited holding period, but this could be too risky. Fixing a period on the holding should be more appropriate."

The FTI has also urged the government to speed up foreign-loan repayments among public and private organisations, hasten machinery imports for infrastructure projects, and maintain the baht's movement in line with its regional peers.

FTI secretary-general Tanit Sorat is optimistic that the baht's appreciation will be brief and that it should be less worrisome when the government's Bt2.27-trillion infrastructure investment kicks off and sparks the need for machinery imports.

In the short term, he said, the government should come up with relief measures for small and medium-sized enterprises, particularly those in the canned-food, textiles and garments industries, which rely on high local content.

Prasarn urged exporters to trade in currencies that are less volatile than the US dollar, or to engage in more currency hedging and forward contracts.

[JimboPSM]

Looking at things from a slightly different perspective, an interesting development which says (to me) quite a lot about the “success” of government policies on the Thai economy, is that CNN has recently started carrying a series of adverts for Thai Hom Mali Rice.

By implication, it may also be saying quite a bit about how the “value” of the Baht may be affecting rice exports in particular and Thai exports generally (along with the Balance of Payments)

The adverts on CNN for Thai rice may have something to do with what was recently reported in the Bangkok Post:

Thailand rice exports hit 12-year low
Published: 24 Jan 2013

Rice exports from Thailand plunged 37 per cent last year to the lowest in more than a decade, plunging the nation from best in the world to third place.

Thailand sold 6.73 million (metric) tonnes with a value of $4.63 billion....

That compares with 10.7 million tonnes, worth $6.43 billion a year earlier....

Thai rice export shipments fell to the lowest since 2000 when the country exported 6.55 million tonnes....

India became the largest supplier last year, selling 10.3 million tonnes, according to the USDA. Vietnam shipped 8 million tonnes, according to a report posted on the Vietnam's General Customs Department website on Jan 16.

Rice exports declined after the government of Prime Minister Yingluck Shinawatra introduced a price support programme in October, 2011. The government now buys the grain from farmers above market rates to boost domestic prices and lift rural incomes.

Stockpiles in Thailand will climb to a record 11.7 million tonnes in the 2012-2013 season now under way, the USDA estimates.

The government bought 9 million tonnes of unmilled rice from farmers and expects to purchase as much as 11 million tonnes this current, main harvest, Commerce Minister Boonsong Teriyapirom said Wednesday.

The strengthening baht has made exports "quite difficult," he told reporters. The baht touched 29.66 per dollar on Monday, the strongest level since August 2011.

The total cost of the rice-purchase programme may be as much as 440 billion baht ($14.8 billion) in the 2012-2013 season, compared with 376 billion baht or around 3.4 per cent of gross domestic product (GDP) in the previous year, according to the World Bank.

Losses are estimated at about 115 billion baht last year and 140 billion this year, the World Bank said in December.

Original article: http://www.bangkokpost.com/news/local/3 ... 2-year-low

In an increasingly price sensitive world one would have to be pretty delusional to believe that the effect of a few adverts on CNN would have any significant impact when compared to the effect of a "strengthening" Baht.

While correlation is not necessarily causation, the BoT and the government would be well advised to check out whether there might just possibly be a bit of a link between government policies, the value of the Baht and the plunging rice sales

[bumper]

Hmm!!!!!!!!!!!! Raise the wage 30% and your surprised you have inflation. The bottom line is the Thai's have not gained in purchasing power and neither have we. That's a lot of rice. Price does matter in tough economic times. I know for fact not all Thai's in Udon are getting the minimum wage, so they have been hit even harder. You know if it went to 26 wouldn't really hurt me. Problem is your getting it from both sides, value of your money going down and prices going up. I have pretty much decided that I will stay right where I am and not build a house on the farm. When bricks double in price as pointed out on a another thread time to rethink things.

Again I'm fortunate only two Klm's to the farm and it is running at a profit. Interesting fish food went up 50 baht a bag on January 1. It doesn't take a rocket scientist to understand that the cost of producing the food on that day had not went up yet. So some are taking advantage and over charging. Done line the cost of a fish will go up. These are not exotic things they are everyday staples of the Thai diet. Well you just got to go with the flow and hope for sanity along the line. But, you try taking a wage hike away, they really didn't put enough thought into this, Thai's in this area may have lost not gained.

The skilled labor in Bangkok did fine. But, I think they already were. One lesson that should have been learned by now is not to underestimate the power in Issan. when it hits what has happened to them I don't think they are going to be happy. They have learned very well the power they have. we will know when the light went on when all the road blocks by farmers start again.

When the government told retailers not to to raise their prices. Lets see you pay out more in labor an product cost and don't increase your sales cost. Now that is a good Government plan and not one that hasn't been used here before. Doesn't work well for a private business. Wonder when the other shoe will drop.

Baht rises, bonds steady

Published: 29 Jan 2013 at 11.32
Online news:

The baht rose by the most in two weeks on speculation policy makers will tolerate currency gains to counter inflation. Government bonds were steady.

Deputy Prime Minister Finance Minister Kittiratt Na-Ranong said last week the central bank should avoid fighting market forces to stem baht appreciation. International investors bought US$3.7 billion more local sovereign debt than they sold this month through yesterday and poured a net $487 million into equities, official data show. Inflation accelerated to 3.63% in December, the fastest in 13 months, government figures showed Jan 2.

"The baht has received support from the perception that Thai authorities are more amenable to currency appreciation," said Sacha Tihanyi, senior foreign-exchange strategist at Scotiabank in Hong Kong. "This has helped encourage portfolio flows. Domestic economic conditions may cause price pressures, while baht gains can help contain imported inflation."

The baht climbed 0.4%, the biggest gain since Jan 16, to 29.85 per dollar as of 8.23am in Bangkok, according to data compiled by Bloomberg. It has advanced 2.5% this year, the most among Asia's 11 major currencies.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell three basis points, or 0.03 percentage point, to 5.42%.

The yield on the 3.125% government bonds due December 2015 was little changed at 2.94%, data compiled by Bloomberg show.

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SET went above 1490, could be this?

Govt won’t use tax to curb strong baht

Published: 30 Jan 2013 at 15.01
Online news:

The government has no plan to use measures to control foreign direct investment (FDI) inflow and outflow to curb the persistent baht appreciation, Finance Minister Kittiratt Na-Ranong said on Wednesday.

Mr Kittiratt spoke to reporters after meeting with a committee formed to help small and medium enterprises (SMEs) affected by the 300-baht daily miniumum wage.

He said Prime Minister Yingluck Shinawatra and all panel members were concerned about the strengthening baht, which is hurting the export sector, and wanted to see a stable currency.

“The meeting has assigned me to discuss the issue with the Bank of Thailand and its monetary policy committee to find an acceptable solution to the problem”, he said.

The meeting agreed that there should be discussions between economists and financial experts on what monetary policy should be introduced to ease the current situation, he added.

The minister insisted that the government will not come up with measures to curb foreign direct investment inflow and outflow, particularly tax measures, which would affect investment returns.

The central bank told the meeting that the ongoing baht appreciation was caused by foreign direct investment inflow to bond markets. This is a risk factor because there was no guarantee that it would be long-term investment, he said.

[bumper]

Well the markets are ding well on both sides of the pond. The dollar and from what I can see the Pound is suffering. Had an odd thought with the dollar losing so much value around 33%, in real money it's going to cost a heck of a lot less to pay back China. This actually started before the 2008 recession. Could there be a method to the madness. Me I'm trying to watch gold these days. Just can't help thinking we just built another bubble. One thing do for sure I will wait till after the Chinese new year, Before I get serious. Just more of the same we have seen for years.

Bangkok Post
Baht's rally stalls near 17-month high

Published: 4 Feb 2013 at 10.02
Online news:

Thailand's baht was little changed on Monday morning, after strengthening in eight of the last nine weeks, on concern policy makers will intervene to check appreciation that puts exports at risk. Government bonds were also steady.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said last week there is concern the strong baht will hurt tourism and overseas sales. The currency reached 29.66 per US dollar on Jan 31, matching a 17-month high reached on Jan 21, and official data show overseas investors poured a net $4.3 billion into government bonds and stocks this year through Feb 1. Thailand's SET Index (SET) of shares reached its highest level since 1994 on Feb 1.

"Fund inflows and gains in the local stocks should be positive for the baht," said Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA. "But there's a concern about intervention across the region, mainly for some Southeast Asian currencies like the baht."

The baht traded at 29.78 per dollar as of 8.41am in Bangkok, unchanged from its Feb 1 close, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 30 basis points, or 0.3 percentage point, to 5.27%.

Overseas shipments, which account for about two-thirds of Southeast Asia's second-largest economy, rose 14% in December after a 27% increase the previous month, a Bank of Thailand report showed on Jan 31.

The yield on the government’s 3.625% bonds maturing in June 2023 was little changed at 3.68%, data compiled by Bloomberg show.

[bumper]

The Nation


February 6, 2013, 6:51 pm

Home » business » Govt 'threatens' BOT on rate cut
Monetary Policy
Govt 'threatens' BOT on rate cut
Sarun Kijvasin
The Nation February 6, 2013 1:00 am
Kittiratt's letter calling for rate cut to rein in baht an act of intervention: Thirachai


The government's motives have been questioned after a letter by Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong to the Bank of Thailand (BOT)'s board of governors, accusing them of negligence for failing to impose a rate cut and allowing the baht to continue to appreciate against the US dollar.

Former finance minister Thirachai Phuvanart-naranubala described the move as "a threat", which would intensify conflicts between the government and the central bank over monetary policy. Yet, he declined to comment on how this would affect the central bank or its governor, Prasarn Trairatvorakul.

"Absolutely [this is intervention]. It's a threat. I have never heard of a similar action being taken by any Thai finance minister or finance ministers in any country," he said in an interview with Krungthep Turakij TV.

His reaction followed Kittiratt's letter to the BOT's board of governors reminding them of their legal duty to maintain financial stability. The finance minister said that by failing to cut the policy rate, Thailand had attracted more foreign capital inflows.

He said he was concerned over the BOT's accounting loss of over Bt530 billion at the end of 2012, largely incurred through foreign-exchange stabilisation measures.

Kittiratt said he wanted BOT chairman Virabongsa Ramangkura to relay his concerns over the huge losses to all members of the board, but insisted dismissing Prasarn as BOT governor was not on his agenda.

Year to date, capital inflows exceed US$4 billion, or Bt120 billion. Due to the inflows, the central bank has had to issue bonds to absorb excess liquidity, to prevent bubbles. This in turn boosts the country's foreign reserves, which are denominated in foreign currencies, but forces the central bank to pay interest on the bonds. Meanwhile, foreign reserves, standing at $181.6 billion as of January 25, are invested in securities, which offer lower interest rates, resulting in the accounting losses.

Thirachai said that in 2012 Kittiratt did not seem to care about the central bank's losses when he forced the BOT to assume the Bt1.1-trillion debt of the Financial Institutions Development Fund. "Indeed, the accounting loss has no influence on macro-economic policies. Such losses are normal for central banks across the world. You'd be shocked if you saw the losses in the US Federal Reserve's account. As long as economic policies can continue without disruption, this is not a worrying issue."

Virabongsa, who also favours a rate cut, said yesterday the letter had been discussed with other BOT governors, and that Kittiratt should receive a reply within this week.

"The board's secretary is working on the reply, which must be made as soon as possible, as all governors - including me - are warned," he said. Actions approved by the board would be detailed, including concern over accounting losses, partly attributable to the high policy rate. He noted that the BOT is allowed to invest more of its foreign reserves, but the right solution to address the losses was to lower the policy rate.

"The board has no authority over the Monetary Policy Committee, but it should heed our concern. The board has the governor [Prasarn] as vice chairman and he also chairs the MPC. He just has a different view."

Praipol Koomsup, an economics lecturer who once served on the MPC, said by law, the board's authority is limited to the appointment of MPC members and the members have a free hand over policy rate setting. "I oppose the policy rate cut to slow down inflows, but will support it if it's done to boost the economy. A cut must be substantiated," he said.

Former deputy finance minister Pisit Lee-ahtam admitted there are other factors affecting inflows and said the economy needs no rate-related support, given substantially high levels of consumption. "Now, the situation is abnormal, with extra-low rates existing in many countries."

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Not going to mean much without BOT involvement. The one thing that has stood out since this thread started the BOT stands alone:

Breakingnews >
Meeting on strong baht next week

Published: 6 Feb 2013 at 15.43
Online news:

Ministry of Commerce officials will meet with private sector representatives next week to discuss ways to ease the impact of the baht's continual appreciation on the forex market, Commerce Minister Boonsong Teriyapirom said on Wednesday.

The minister said the prime minister had assigned his ministry to oversee the export sector and small- and medium-enterprises (SMEs) affected by the continuing strengthening of the Thai currency.

The meeting next week would involve ministry officials and representatives from the Federation of Thai Industries (FTI) and the Thai Chamber of Commerce (TCC), he said.

The meeting woud hear reports on pressing problems in the private sector caused by the currency's strong foreign exchange rate so that his ministry could draft appropriate assistance plans.

Mr Boonsong said the Bank of Thailand (BoT) should keep a close watch on the baht's movement. If the currency was too strong the exchange rate could affect the overall outlook for the country’s exports.

He had directed his commerce attaches overseas to study the market situation in countries where they were stationed to help the ministry to come up with a suitable export promotion plan.

The private sector on Tuesday stepped up its pressure on the BoT to ease the baht's strength, saying the central bank should look at the possibility of an interest rate cut and tax measures to cope with foreign capital inflow.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), which comprises the FTI, the TCC and the Thai Bankers' Association, met on Monday to discuss the impact of the strong baht, which was quoted today at 29.77 baht against the US dollar.

JSCCIB chairman Payungsak Chartsuthipol said strong foreign capital inflows had strengthened the baht and short-term fluctuations had adversely affected exporters.

Mr Payungsak, also the FTI chairman, said the committee will meet with the Commerce Ministry this week to discuss ways to maintain the competitiveness of exports.

Finance Minister Kittiratt Na-Ranong said on Tuesday that he had expressed concern about the strengthening baht in speeches at various meetings because as finance minister he was legally required to oversee the economy and take responsibility for any negative consequence.

Mr Kittiratt, deputy prime minister for economic matters, said the baht's continuing appreciation would affect exports.

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If this was to happen it will change things a lot, Some of he stocks a friend now holds are 40's X' P.E.. Not where he bought them in real money he won't be hurt.

Stimulus makes SET open to foreign shocks
Wichit Chaitrong
The Nation February 12, 2013 1:00 am
Index could suffer 40% plunge: expert


The government's economic stimulus package has helped push share prices up into dangerous territory and any shocks from the West or China could send the SET Index diving 40 per cent, a foreign financial expert has warned.

"Our worry is that it's really not a necessary policy. Thailand's economy has been recovering quite nicely since the floods," said Paul Gambles, managing partner of Bangkok-based MBMG Group, a financial-service provider.

He said he was extremely worried about public debt. Thailand and Indonesia had started from the same level but now Thailand's sovereign debt is approaching 60 per cent of gross domestic product while Indonesia is more conservative and keeps its public debt at about 30 per cent of GDP.

Government initiatives like the rice pledging, credit-card subsidy and first-car tax-rebate schemes have revved up economic activity and also sucked in massive capital flows, he said in an interview with The Nation.

The projects have involved a lot of capital commitment but some of them are quite long-term. Without government stimulus, the fair value of the Stock Exchange of Thailand would be about 10 per cent lower, he said.

Any negative economic news from the West such as the collapse of the euro, bank failures in the United States and Europe or trouble in China's banking system could spark a sharp fall of the Thai and other Asian equity markets.

If the SET Index plummets from the current 1,500 points to 1,300 or below 1,000, Gambles would recommend investors to buy Thai stocks aggressively.

Bank of Thailand chairman Virabongsa Ramangkura has called for its Monetary Policy Committee to cut the policy rate from the current 2.75 per cent to stem large capital inflows. However, Gambles did not agree with this proposal for a rate cut, though he shares Virabongsa's concern about a market bubble. He said the government should drop the stimulus measures instead.

If the central bank does lower the interest rate, the upside is that it would help weaken the baht, as the strong currency is causing a major headache for exporters right now, Gambles said. "But I think if we have the growth rate that we have currently, we have stimulus going on right now and then we have a weaker baht and lower interest rate, inflation will be a real problem."

Many people he has talked to are very worried about the rises in the prices of food, rents and wages. Structural wage inflation could come to resemble a cancer that embeds itself in the economy. The minimum wage has started going up to an excessive level that could get inflation out of control, he claimed.

Inflation in January was 3.39 per cent year on year.

Lowering the interest rate is not the right solution because it would cause unintended consequences, he said. There should be other tools to tame the baht.

"The real answer would be that we fix a core fundamental policy issue if we take away a lot of stimulus. If we start to reduce government debt, that will deal with the strength of the baht," he said.

Interest rates should be higher right now. Cutting rates is exactly the wrong way, he said.

Joanne Baynham, MitonOptimal's head of international portfolio management, also cautioned against a rate cut.

Reducing rates would encourage people to take money out of the bank and spend it, as people don't get a return from lower interest rates but from high inflation rates.

"Ultimately, it'll lead to inflation. It's a very dangerous game. Be careful," she said.



Year to date capital inflows (US dollars)

India $7.134 billion

Taiwan $1.589 billion

Indonesia $957 million

Philippines $802 million

Thailand $192 million

Vietnam $170 million



Source: Deutsche Bank/Tisco Securities

[bumper]

I don't get it how will this slow the growth of the baht?

Our are they just saying a 10% increase is a problem?

It seems to me paying the foreign debt early will just make Thailand more attractive for foreign money, Thus strengthening the baht further.

From the Nation

The government and state-run agencies will take advantage of the apppreciated baht and speed up repayments on overseas debts, to clear them before the due date, Finance Minister and Deputy Prime Minister Kittiratt Na-Ranong said on Wednesday.

Mr Kittiratt said the government will repay the Japan International Cooperation Agency (JICA) before the end of the loan period. Thailand owes around 34 billion baht to the Japanese lender.

Finance permanent secretary Areepong Bhoocha-oom said state enterprises were likely to repay 40-50 billion baht of overseas debt to foreign lenders within a six-month period, which would also help counter the strenghtening the baht.

The strong baht has become a problem for Thai exporters lately as the currency has appreciated more than 10% in the past six months.

State-run agencies have combined overseas loans of 308.5 billion baht, while the government owes a total of 44.4 billion baht to foreign financial institutions.

After a meeting of government agencies on finance matters, Mr Kittiratt said the JICA offered Thailand a loan for infrastructure development, but the government would prefer domestic loans because currently there is high liquidity in the country.

[bumper]

Sounds like you might well be on the right track. Got this from today's Bangkok Post. If I've understood it correctly, maybe the baht will start to ease back some more after March 9th.

QUOTE FROM BANGKOK POST

Baht eases off after steady appreciation
PARISTA YUTHAMANOP

The baht eased yesterday after steadily appreciating over the past few weeks as Singapore's Temasek Holdings brought in funds for a tender offer to Shin Corp shareholders, say currency dealers. External factors that resulted in Japanese yen and Chinese yuan appreciation also helped buoy the baht, they said.

The baht closed at 38.76/78 to the US dollar yesterday, compared with 38.64/66 on Thursday.

The yen closed at 116.26 to a dollar, down from 115.55 in the morning and the yuan stood at 8.0354/0404 to a dollar, up from Thursday.

Satian Tanasarit, chief of treasury and markets at TMB Bank, said there had been steady capital inflows over the past few weeks in the swap and spot markets.

''The [special] funds were brought in [to convert to baht] for the tender offer for Shin Corp's retail shareholders ahead of the deadline [March 9]. The deal was originally structured through the swap market, but its size is so big that the buyers [of baht] have had to split it with the spot market.''

Aspen and Cedar, two companies controlled by Temasek, have tendered for 1.515 billion baht outstanding in Shin shares and 24 million shares under the employee stock option programme for 49.25 baht per share, open until next Thursday.

Fund inflows resulted in the baht swinging by 64 satang last Thursday, from 39.005/025 to a dollar.

Mr Satian said buying by local dealers for profit-taking also pushed the baht up on Thursday.

The future trend of the baht would hinge on the yen and yuan, once Temasek closed its tender offer, he added.

''Under the Bank of Thailand's foreign exchange controls, the baht has been fairly stable. That's why it has swung sharply from such capital inflows,'' he said.

Usara Wilaipich, an economist at Standard Chartered Bank (Thailand), said the market expected the Bank of Japan to raise its interest rate for the first time in five years, which would contribute to the appreciation of the yen.

As well, China remained under continuing pressure from the United States to revalue the yuan further.

The domestic political situation would be a key factor for the baht in the short-term, given that foreign investors had large positions on the Thai stock market.

''We have monitored the reaction of foreign investors to the political situation. They now have high exposure in the local bourse, given 200 billion baht in total net buying currently,'' said Mrs Usara. ''An unexpected political insurgency could put pressure on the baht.''

However, foreign investors could shift funds into the bond market which offers a high 4% yield for three- to six- month terms, instead of leaving the country abruptly, she said.

Tom Paiboon Nalinthrangkurn, research head at Tisco Securities, said high oil prices and imports of raw materials for megaprojects would lead the baht to depreciate this year.

''The baht will remain strong, if there isn't much megaproject investment this year. ... The economy is unlikely to be materially affected this year [by the political turmoil],'' he said.

''Investors in the real sector will not change their minds on a daily basis, once they have made their decisions.''

Supavud Saicheua, managing director of Phatra Securities, said foreign investors expected the Thai Rak Thai party to stay in government after the April 2 election.

''In any case, they will watch whether the past government's pro-growth and proactive economic policies continue and whether the country will survive in an era of globalisation.''

Not the date from the first page of when this thread started. Wouldn't be nice to see this again and we were complaining then.

The baht closed at 38.76/78 to the US dollar yesterday, compared with 38.64/66 on Thursday.

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Well this certainly isn't helping us:

Speculators push up baht again

Published: 22 Feb 2013 at 11.19
Online news:

The value of the baht advanced Friday, halting a two-week loss, on speculation that the country's accelerating economic growth will attract investment.

Gross domestic product (GDP) rose a record 18.9 per cent year on year during the last quarter, taking 2012's rate to 6.4 per cent. That was more than the 6.1 percent in Indonesia, the only economy in the region that is larger than Thailand's.

Overseas funds bought $1.9 billion more sovereign notes than they sold in February, according to the Thai Bond Market Association, while 10-year debt yields fell three basis points this week to 3.62 per cent.

"The economy is very strong and it's natural to see appreciation pressure on the baht," said Koji Fukaya, president of Office Fukaya, a currency research and consulting company in Tokyo. "From time to time, authorities may have to step in to the market just to slow the pace of appreciation."

The baht strengthened 0.1 per cent Friday morning and this week to 29.84 per US dollar as of 8:37 a.m. in Bangkok, according to data compiled by Bloomberg. The currency has climbed 2.5 per cent in 2013, the best performance in Asia.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 5.25 per cent, the lowest level in a month. The measure fell 18 basis points, or 0.18 percentage point, this week.

The Bank of Thailand said it will closely monitor capital inflows and take action if needed after keeping its policy rate unchanged at 2.75 per cent on Wednesday.

Government data next week may show exports, which account for about two-thirds of the nation's economy, increased 13 per cent in January and imports jumped 19 per cent, according to the median estimate of economists in a Bloomberg survey.

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Breakingnews >
Baht falls from 5-week high

Published: 7 Mar 2013 at 10.51
Online news:

Thailand's baht fell from a five-week high on speculation importers increased dollar purchases to take advantage of a more favorable exchange rate. Government bonds declined.

The currency touched 29.68 per US dollar on Wednesday, the strongest level since Jan 31, after a rally in the US stocks helped improve demand for riskier assets. Shipments from abroad jumped 41% in January, while exports rose 16%, resulting in a trade deficit of $5.5 billion, according to the latest official figures.

The baht near its recent high is probably a "good level for importers to buy dollars", said Kozo Hasegawa, a foreign- exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. "From the trade balance-perspective, there’s room for two-way movements in the baht."

The baht weakened 0.2% to 29.79 per dollar as of 8.33am in Bangkok, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 5.21%.

The yield on Thailand's 3.625% government notes due June 2023 rose one basis point to 3.66%, the highest level since Feb 4, data compiled by Bloomberg show. The one- year onshore interest-rate swap, the fixed cost needed to receive a floating payment, rose one basis point to 2.72%.

Thai fixed-income markets are too bearish after pricing in the most monetary tightening in Asia even as core inflation slowed, Arup Ghosh, a Singapore-based hedge fund strategist at Citicorp Investment Bank, wrote in a note.

Investors should receive fixed rates in five-year swaps, he recommended, entering into such trades at 3.4% and targeting 3.2% and 3%. The rate rose one basis point today to 3.35%.

[KB_Texas]

So can one of you finance geniuses tell me why the dollar is trading at an almost 7 month high, but it is still going down vs. the baht? A couple of days ago, the exchange rate was 29.71 or thereabouts. This morning, it was 29.50! Right now, it is still between 29.4 (CIMB) and 29.53 (Govt Savings Bank). This really makes no sense to me at all...

The dollar traded near seven-month highs against a basket of currencies on Thursday after robust data increased optimism the U.S. economy was on a recovery path and could withstand fiscal tightening.

http://www.reuters.com/article/2013/03/ ... S920130314

KB

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Because the BOT wants it that way. I was thinking the same thing especially since it was only a few days ago I read an article saying foreigners were net sellers in the SET. Financial stability, off the book loans don't say that to me. As am another poster once said how could you invest when the Finance Ministers says it is OK not to tell the truth. Fact is very little of that kind of information is ever reported outside Thailand. If the current PM actually finishes her term she will be the second to have ever done that. The other was her brother. Politics is comparable to Texas weather don't like it wait a min. One of the best ones I remember, was the worlds biggest bill board created for a visiting American President wouldn't see the slums. So here you really can't believe your lying eyes.

On paper things look good. But, you have companies selling at 40 times P/E. There is a lot of hope for infrastructure building, sounds good how long did it take to get 3-G approved. Just saw today where the rate of charge has been approved. Best I remember about four years with all the law suits before the auction could be done. Now that was private money. Not public money, that being contested of that is just getting started.

This is a very unique market, if you were to only look at the numbers the Market is on fire. But, did a little further and may not look so good. If the U.S. markets continue a they have at least they got a little competition for the money. I don't think anyone a can logically answer that question. But, if anyone can it's Jimbo.

Baht rise 'a sign of confidence'
SARUN KIJVASIN
THE NATION March 14, 2013 1:00 am
Bank of Thailand Governor Prasarn Trairatvorakul yesterday calmed nerves over Tuesday's sudden spurt in the baht, saying it reflected growing investor confidence in the country's economic fundamentals.
The rapid appreciation was likely due to currency purchases by foreign investors after the country's credit rating was revised upwards and the central bank indicated that its 2013 growth forecast would likely be revised upwards, he said.

On March 8, Fitch Ratings upgraded Thailand's Long-Term Foreign Currency Issuer Default Rating to "BBB+" from "BBB" with a stable outlook.

Last week, the central bank said strong momentum could warrant an upward tick in its prediction of economic growth for this year from 4.9 per cent to at least 5 per cent.

Over this week, Narongchai Akarasanee, a member of the Monetary Policy Committee, signalled the possibility of an urgent meeting of the MPC before the next one scheduled on April 3 following the sharp rise of the baht against the US dollar. Although the baht surged swiftly on the morning of March 12, some buying of dollars began in the afternoon, leading to some weakening in the baht.

"There came out an upgrade of credit ratings and the economy expanded satisfactorily, while neighbouring countries will have elections with conflicts. Despite the strengthening of the baht, it moves in two directions," Prasarn said.

However, operators should be careful about the volatility of the baht.

There was no need to change the exchange rate policy, given the satisfactory results of the current method. The central bank is regularly monitoring movements in the exchange rate to see if they are in line with the economic direction.

The central bank has been reporting to the MPC as usual on the baht situation and there was no need for a special meeting now.

On March 12, capital flowing into Thailand was not much and net capital inflow was very small.

"We are not bothering about a particular issue. Now, we try to implement policies, particularly about the market mechanism, for a balance, while the exchange rate framework is moderately flexible," he said.

Although some observer may believe the baht's ascendancy is the result of foreign funds' investment in the Finance Ministry's inflation-linked bonds, that may not be possible because it was just an interest in purchasing the bonds. There was no real payment, he added.

Sira Klongvicha, chief investment officer at Krungsri Asset Management, said that the United States' extremely low interest continues with quantitative easing until there is a clear sign of recovery, driving capital to flow into emerging markets, particularly in Asia.

He said that Krungsri Total Return Bond (KF-TRB), which has a policy to invest in PIMCO Total Return Bond Fund Class E Acc (USD), was expected to yield a return of about 3-5 per cent per annum.

"The policy rate [one-day repurchase rate] is expected to remain at 2.75 per cent until the end of 2013 due to the poor economic situation abroad. Emerging markets have not hiked their rates yet. If only Thailand hikes the rate, that could have an adverse impact on the country and encourage capital inflow. Therefore, the Bank of Thailand may try to maintain this balance," Sira said.

He suggested fixed income fund investment with a maturity of no more than one year.

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Now you want to make life really confusing check this out. Note that both of these articles are from the same day

By Chikako Mogi

TOKYO (Reuters) - Asian shares fell on Thursday with regional factors outweighing positive sentiment from another record Wall Street close after strong U.S. retail sales sustained an optimistic growth outlook, while the dollar index stayed near seven-month highs.

The MSCI's broadest index of Asia-Pacific shares outside Japan extended early losses to fall 0.6 percent by midmorning, led lower by the materials sector which slid 1.3 percent.

Resources-reliant Australian shares slumped 1 percent, hit by weaker commodity prices and fading expectations for an interest rate cut.

Hong Kong shares fell 0.7 percent, after losing the last of their 2013 gains on Wednesday. Property developers retreated after two of the territory's leading banks raised mortgage rates for the first time since 2011. Shanghai shares eased 0.1 percent.

Japan's Nikkei stock average bucked the regional downtrend to rise 0.4 percent.

Net inflows into the Japanese mutual fund market hit $11 billion in February, the largest monthly inflows in almost six years as rallies in domestic shares the last four months encouraged investors to direct new money into the fund market.

Asia is seeing some breakdown in correlation with overseas markets and regional bourses are being driven more by local factors, said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong.

"In the region, the focus rather is whether China would tighten more aggressively, political risks regarding North Korea or the response of policymakers in terms of currencies. Regional factors are gaining more importance," she said.

POLICY IN FOCUS

Monetary policy direction remains diverse in the region, with some central banks in easing mode while others remain watchful of inflation. The dollar's strength, which is capping gains for Asian currencies, also be tempering Asian reaction to the solid U.S. economy.

South Korea's central bank held interest rates steady at 2.75 percent for a fifth straight month, in line with market expectations, as it evaluated economic conditions overseas and heightened tensions with North Korea. South Korean shares fell 0.9 percent.

"Expectations for government stimulus have turned into disappointment after today's rate decision," said Oh Hyun-seok, a market analyst at Samsung Securities.

"Domestic consumption is weak, but the Bank of Korea is missing out on opportunities to cut rates."

The Australian dollar jumped to a five-week high of $1.0383 after data showed the country's employment topped estimates and soared by 71,500 in February, the biggest increase in over a decade, almost ruling out any cut in interest rates before the middle of the year.

In New Zealand, the central bank held its key interest rate at a record low 2.5 percent for a 16th straight meeting, while suggesting that in some circumstances a cut might be possible.

The U.S. government reported retail sales grew 1.1 percent in February, the fastest rise since September, lifting the dollar index to 83.055 on Wednesday, its highest since August 3.

The blue chip Dow Jones industrial average marked the index's longest consecutive winning streak since November 1996 with a record closing high on Wednesday, a ninth straight session of all-time highs.

The dollar was trading at 95.83 yen, below Tuesday's high of 96.71 yen, its peak since August 2009.

The euro was at 124.22 yen, retreating from a one-month high of 126.03 reached on Tuesday.

European shares recouped their earlier losses to end flat near 4-1/2-year highs on Wednesday, but the euro took the brunt of the strengthening dollar on a brighter economic outlook in the United States than for the euro zone.

The euro was at $1.2964, after falling to a three-month low of $1.2923 on Wednesday, also weighed by a lukewarm bond auction in Italy.

Italy sold 5.32 billion euros of new three- and 15-year government bonds, paying the highest yield since last December for the shorter-term debt, in its first bond auction since Fitch cut the country's credit rating on Rome's inconclusive elections last month.

Investors will turn to a Spanish bond auction scheduled later in the day, with Madrid offering debt maturing in 2029, 2040 and 2041.

Crude oil eased 0.2 percent to $92.35 a barrel while Brent eased 0.2 percent to $108.32.

(Additional reporting by Hyunjoo Jin in Seoul; Editing by Eric Meijer)