Big Baht drop - Bank of Thailand act at last - hurrah!

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Baht falls sharply after BoT action

30% reserve against short-term inflows

PARISTA YUTHAMANOP

The baht fell sharply yesterday as the Bank of Thailand imposed harsh new reserve measures on local banks in a bid to curb short-term capital inflows. Effective immediately, financial institutions must deduct 30% as a reserve requirement from short-term foreign exchange transactions against the baht. Transactions related to trade in goods and services, or repatriation of investments, are exempt.

After one year, customers whose funds have been withheld can request a refund of the reserve by submitting evidence that the money has been in Thailand for at least one year, said Tarisa Watanagase, the central bank governor.

Customers seeking repatriation of reserves before one year would receive only two thirds of the withheld amount. Financial institutions must remit the reserves to the central bank on a monthly basis, with all earnings gained by regulators to be earmarked for public use.

The baht, which had traded at a nine-year high of 35.11 to the dollar yesterday morning, fell promptly after the measure was announced, and traded late at 35.51/53 compared with 35.25/28 on Friday.

Dr Tarisa said the central bank would monitor market trends and could adjust the reserve requirement if necessary.

\'\'The measure will basically reduce [market] liquidity. It should help reduce short-term flows because it increases investors\' costs. This is a measure to discourage short-term flows, while long-term investments are still welcome,\'\' she said.

Earlier this month, the central bank imposed several measures limiting foreign investment in short-term debt instruments to help slow the appreciation of the baht, one of the best performing currencies this year with a gain of nearly 15% against the dollar since January.

Dr Tarisa said the baht had risen \'\'beyond economic fundamentals\'\', with capital inflows of $950 million in the first week of this month against an average of $300 million per week in November.

The central bank had indicated that it was considering a withholding tax on short-term inflows, but had decided to impose a reserve requirement instead due to greater flexibility if changes in the reserve ratio are needed.

Dr Tarisa said the 30% ratio was calculated based on returns on investment in the money market and the recent appreciation of the baht.

Full article http://www.bangkokpost.net/Business/19Dec2006_biz32.php

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Does the new 30% rule affect those of us living or wishing to live in LOS?

How about someone bringing in the 800K for a retirement visa?

Does the new 30% rule affect those of us living or wishing to live in LOS?

How about someone bringing in the 800K for a retirement visa?

No and no.

I've noticed that the dollar likes to "dip" into the high season and wondered if this was because Thailand manipulated things so that the influx of western tourists would get paid less baht for the dollar. This wouldn't seem in line with 'restricting foreign inflows', however, it SEEMS to me as more foreign money would have to come in to cover the same tourist expenses, thus increasing inflow.

From the standpoint of anyone contemplating bringing foreign currency IN to Thailand, like the 800K for retirement, buying a condo, or investing in the stock market this baht low should be grim. But it all doesn't make sense to me because there was a recent rise in the SET (that busted with the recent BOT action). If all this could be explained, well, try anyway, I'd be appreciative.

The long term rise of the baht over the Toxin years is pretty disturbing (I think). I'm wondering if something is about to bust.

The stock market and currency exchange rates are not necessarily related. Just look at the US: the stock market is at an all-time high, while the dollar is in the shits.

Anyway, the BOT intervention is a very welcome development. As the owner of a company whose receipts are in dollars but whose expenses are in baht, it is a godsend.

I've noticed that the dollar likes to "dip" into the high season and wondered if this was because Thailand manipulated things so that the influx of western tourists would get paid less baht for the dollar. This wouldn't seem in line with 'restricting foreign inflows', however, it SEEMS to me as more foreign money would have to come in to cover the same tourist expenses, thus increasing inflow.

From the standpoint of anyone contemplating bringing foreign currency IN to Thailand, like the 800K for retirement, buying a condo, or investing in the stock market this should be grim. But it all doesn't make sense to me because there was a recent rise in the SET (that busted with the recent BOT action). If all this could be explained, well, try anyway, I'd be appreciative.

The long term rise of the baht over the Toxin years is pretty disturbing (I think). I'm wondering if something is about to bust.

More Bath story in the Nation.

http://www.nationmultimedia.com/2006/12 ... 021894.php

http://www.nationmultimedia.com/2006/12 ... 021935.php

And update .

http://www.nationmultimedia.com/2006/12 ... 021944.php

BBC WORLD

As a result of the draconian controls on capital the Thai stockmarket dropped 10% this morning. Trading was suspended for a time. After trading started a drop of a further 5%

had happened

==============================

Stock index still plunge after SET resume trading

The SET resumes stock trading at noon. The SET index fell further by 13.74 per cent or 100.37 points to 630.18 at 12.12pm. Bank of Thailand has asked all brokerage companies to discuss about the issue on 1.30pm.

Key Democrat Party member Korn Chatikavanij urged the Bank of Thailand to immediately reverse the recently-introduced measure to intervene the currency, saying that it would cause the damages to the capital market for years.

Today, Thai share prices plunged by 10 per cent at 11:30 am after the central bank took the most stringent measures since the 1997 Asian financial crisis to curb the baht\'s rise.

The Stock Exchange of Thailand implemented the circuit breaker measure for the first time in history to deal with the drop by suspending the trading for 30 minutes at 11:30 hours.

At 11:30, the SET nosedived to 656.49, the lowest point of the day so far. The Stock Exchange of Thailand (SET) composite index nosedived 64.62 points or 8.85 per cent to 665.93 in the first minutes of trading and the bluechip SET 50 index fell 53.10 points to 458.90.

Korn said: \"The measure causes the damage to the capital market. The Bank of Thailand should immediately reverse this policy, because no investors who will want to spend Bt100 just to have Bt30 withheld. And if they will get only Bt90 if they want to remit the money in less than one year.\"

Starting from Tuesday, financial institutions would be required to withhold 30 per cent of foreign currencies bought or exchanged against the baht, except those related to exports, said BOT governor Tarisa Watanagase.

Korn said that the damage caused by the measures could be overwhelming. Besides, there\'s rule from the financial institutions that they cannot invest in countries with capital control. He said the capital market in Chile for instance was damaged by 10 years while Malaysia was damaged by 3 to 4 years.

He said Bank of Thailand should implement the separate measures to deal with money and financial capital markets. Speculators are mostly in the bond markets. Bank of Thailand should separate the measurement in money and capital markets speculators are mostly bond market.

The Nation

Even though I am American who is hurt by a strong baht, I am deeply dismayed by this desperate government's steel handed action. This will backfire in very bad ways. People who look only short term (that beer cost me 25 cents less today, yeah!) are VERY foolish.

Jingthing, dear. Thai exports were already finding it hard to compete with Chinese ones. Now they're 20% more expensive than last year at this time. Thailand depends on exports to survive. Perhaps you have a better solution?

As far as I am concerned it\'s a brilliant method of controlling the leeches who live off International money exchange and deliberately deflate or inflate national currencies with their obscenely huge wealth and rapacious followers. Few Nations, and I include Great Britain and Australia in that, have been able to control these Buffets. There again what do I know? Time will tell.