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Baht to climb further on capital inflows as trade war heats up


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Baht to climb further on capital inflows as trade war heats up 

By PHUWIT LIMVIPHUWAT
THE NATION

 

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The baht is expected to strengthen further as the escalation of the China-US trade war hastens foreign capital inflows into Thailand's "safe haven" bond market while the US Federal Reserves may again cut interest rates. 

 

The ongoing tit-for-tat superpower trade conflict has intensified with China announcing on August 23 a set of preparatory tariffs of between 5 to 10 per cent on $75 billion worth of US goods. US President Donald Trump responded by raising existing tariffs on $300 billion worth of Chinese goods by 15 per cent, effective December 15.

 

Despite playing down the spike in trade tensions on Monday by saying that negotiations are now back on the table, the economic and financial impacts on the world economy have led to much uncertainties. 

 

Thailand's economy, in particular, stands in the cross-fire of the trade tensions as the Kingdom produces electronic parts and agricultural products that are sent to China before being shipped to the US. Hence, the tariffs imposed between the two countries directly impact Thailand's own exports, causing the country's volume of shipments to decline in the first half of 2019.

 

"The deterioration of the US-China trade conflict has further depressed global trade and investment sentiments," said Chatree Rojana-Arpa, executive vice president for strategy and product development at KTB Securities (Thailand).

 

The worsening sentiment in the global economy will continue to have an adverse impact on Thailand, which is an export-reliant economy, said Mana Nimitvanich, first vice president of Krungthai Bank's Global Business Development and Strategy Group.

 

Furthermore, the baht is likely to get stronger in the upcoming months if the trade war continues as the US Federal Reserves will be more inclined to again lower interest rates , Chatree said. 

 

This will cause the US dollar to depreciate against the Thai currency, he added. 

 

Thailand, he said, is seen as a safe haven for global investors and if the trade war is prolonged, investors will continue to invest in Thailand's bond market, accelerating the baht's rise against the US dollar. 

 

The Bank of Thailand has tried to limit hot money inflow into the Kingdom and even lowered the country's policy interest rate in an attempt to keep the baht strength under control. However, the impact of these measures are yet to be seen clearly, he claimed.

 

"The central bank is also worried that lowering interest rates further will worsen the problem of household debt as well as risking the imposition of US sanctions as Thailand has been included in the country's watch list of currency manipulators," said Mana.

 

Standard Chartered Bank (Thailand) has predicted that the baht will remain strong at Bt30.5 per US dollar in the rest of 2019.

 

"We are not sure if the baht strength can be kept under control by the central bank in the upcoming months as safe haven inflows continue into Thailand's bond market ," said Tim Leelahaphan, a StanChart's economist.

 

On Monday, Thailand's bond market saw a net inflows of Bt1.83 billion from foreign companies, according to the Thai Bond Market Association.

 

"The baht's strength will lead to negative impacts on Thailand's exports and tourism figures. As long as the trade war continues, this negative impact will stay," Chatree said.

 

Private exporters must work closely with the public sector in identifying export opportunities in China and the US as the two countries lose out on each other's markets, said Kriengkrai Thiennukul, vice chairman of the Federation of Thai Industries.

 

Exporters must increase their marketing efforts, particularly in smaller cities in China where market penetration from Thai firms is still relatively low, Charee said. This way, exporters can capitalise on the opportunities that arise from the trade war, he added. 

 

Kriengkrai also called on the public sector to be more active in negotiating free trade agreements.

 

Furthermore, he said, the government must do more to promote locally produced products so that exporters can make more domestic sales amid global economic uncertainties. 

 

"We have seen various measures launched by the Thai government recently to boost domestic consumption," Tim from StanChart said.

 

"However, there is yet a concrete plan to boost Thailand's exports, the biggest loser of the trade war, " he said.

 

Source: https://www.nationthailand.com/business/30375435

 

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-- © Copyright The Nation Thailand 2019-08-27
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13 minutes ago, webfact said:

"However, there is yet a concrete plan to boost Thailand's exports, the biggest loser of the trade war, "

Thailand exports are the biggest loser of the trade war.

 

But oversea companies see it as safe heaven? Perhaps because it's stellar rule of law and stable political situation?

 

13 minutes ago, webfact said:

"The central bank is also worried that lowering interest rates further will worsen the problem of household debt

Hmm, obviously having no tourists spending big and exports dropping like a rock will help the problem of household debt.

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31 minutes ago, webfact said:

"However, there is yet a concrete plan to boost Thailand's exports, the biggest loser of the trade war, " he said.

Great idea lets export some concrete plans,bloody marvellous idea,solve all our problems,what's next on the agenda?Road deaths?Throw a concrete plan at that too.In fact why not throw a blanket concrete plan at all the problems then the voters will think we've got everything sorted.

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10 minutes ago, FarFlungFalang said:

ust finished reading the article where the Baht is apparently in retreat but here it's going up and now I'm getting dizzy and think I might throw up!

Can you please post the article link. Would like to know why some one will predict Baht retreat. Is the CB doing something. Already transferred 7 million to Baht. Expecting it not to weaken in future. 

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4 minutes ago, onera1961 said:

Can you please post the article link. Would like to know why some one will predict Baht retreat. Is the CB doing something. Already transferred 7 million to Baht. Expecting it not to weaken in future. 

It's in the main news forum but here you go.

https://forum.thaivisa.com/topic/1120093-foreign-baht-speculation-in-retreat/

Good luck your gamer than I am in this climate.

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12 minutes ago, Berkshire said:

Yes, that's quite a contradiction.  I guess we'll see where the baht goes to see who's correct.

I vote the baht goes down as my belt tightening is fast running out of holes!

  The bubble will burst if one goes by hysterical evidence (pun intended).

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2 hours ago, webfact said:

The central bank is also worried that lowering interest rates further will worsen the problem of household debt as well as risking the imposition of US sanctions as Thailand has been included in the country's watch list of currency manipulators," said Mana

Currency Manipulators .. blimey as far as having aspersions cast you're way goes that is not a trifling one ..

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2 hours ago, webfact said:

Baht to climb further on capital inflows as trade war heats up 

That should kill off the rice exports nicely; especially on top of the impact of the drought. India and Vietnam will be laughing all the way to the bank.

But no need to worry, PM Prayut has appointed himself the commercial mastermind in charge of running the economy. Only a matter of time before more economic stimulus rabbits start emerging from the hat. 

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2 minutes ago, Cadbury said:

That should kill off the rice exports nicely; especially on top of the impact of the drought. India and Vietnam will be laughing all the way to the bank.

But no need to worry, PM Prayut has appointed himself the commercial mastermind in charge of running the economy. Only a matter of time before more economic stimulus rabbits start emerging from the hat. 

 

 

... Would you prefer they did nothing ?

 

Blaming Payuth for global warming is a poor effort - even for you.

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3 hours ago, webfact said:

"We are not sure if the baht strength can be kept under control by the central bank in the upcoming months as safe haven inflows continue into Thailand's bond market ," said Tim Leelahaphan, a StanChart's economist.

 

Excuse my ignorance but can they not just selling bonds or are they legally bound to do so ?

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1 hour ago, Jip99 said:

 

 

... Would you prefer they did nothing ?

 

Blaming Payuth for global warming is a poor effort - even for you.

You seem to have trouble reading the written word. Your comprehension doesn't seem to be much better either.

I made no comment about global warming. I was discussing the impact of the high baht on rice exports. I made a remark that that the drought would also have a detrimental effect.

The matter of Prayut appointing himself as the country's economic guru is a separate issue and nothing to do with global warming. But I will blame him for the lack of initiative in improving water storage for rice irrigation.

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8 hours ago, FarFlungFalang said:

I vote the baht goes down as my belt tightening is fast running out of holes!

  The bubble will burst if one goes by hysterical evidence (pun intended).

And to make matters worse bars have been cutting back on the balloons.... 

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1 hour ago, Youlike said:

So the Chinese are bringing their cash into safe haven Thailand but the thai businesses will suffer from it.

So it seems. The question is where exactly is it flowing to. Bonds are just part of the tsunami, Chinese like to hide it so it must be going into private placements or directly in the forex markets. Not sure what Thailand can do there, except extreme capital controls and that'll spook out FDI for sure.

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10 hours ago, FarFlungFalang said:

Great idea lets export some concrete plans,bloody marvellous idea,solve all our problems,what's next on the agenda?Road deaths?Throw a concrete plan at that too.In fact why not throw a blanket concrete plan at all the problems then the voters will think we've got everything sorted.

Concrete  boots and free  swimming lessons to all mps  would be good

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16 hours ago, FarFlungFalang said:

Just finished reading the article where the Baht is apparently in retreat but here it's going up and now I'm getting dizzy and think I might throw up!

So right?  two articles down from this one,  two things done to prevent it from happening.  Last few articles this month on Thailand doesn't want investor to park money short term which is what some are indicating the problem with the Baht rise hurting their economy.  This goes against everything I've been reading the past month?  Up down and around?

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I tend to think the dollar will start dropping fairly soon. Will the baht maintain it's current power? Who knows. But the dollar drop will not be a healthy trend for many of us. I also foresee a major correction in the worldwide stock markets, in the very near future. That will probably cause more havoc in the West, than here in Asia, though all markets will be affected. 

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Well that begs the question:  If foreign speculative inflows (hot money) drives the Baht ever higher, why doesn’t any other Asian country have the same currency appreciation problem to this extreme?

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17 hours ago, HeyHeyHey said:

Thailand exports are the biggest loser of the trade war.

 

But oversea companies see it as safe heaven? Perhaps because it's stellar rule of law and stable political situation?

 

Hmm, obviously having no tourists spending big and exports dropping like a rock will help the problem of household debt.

Just wonder how many "hospitality workers" will be feeling the pinch of a sudden decline in customers... they will be going into the higher debt zone soon.

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12 minutes ago, Isaan sailor said:

Well that begs the question:  If foreign speculative inflows (hot money) drives the Baht ever higher, why doesn’t any other Asian country have the same currency appreciation problem to this extreme?

I also wonder why all neighbour countrys and even australia have excellent exchange rates for the usd.

For myself i just spend my money in neighbour countrys and float in and out of thailand when i need something i cant find elsewhere. 

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15 hours ago, Jip99 said:

Would you prefer they did nothing ?

Yes. Gouvernement intervention into the economy usually doesn't end well. Yet they keep trying to intervene. 

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1 minute ago, Tayaout said:

Yes. Gouvernement intervention into the economy usually doesn't end well. Yet they keep trying to intervene. 

 

 

The drought-ridden Thai farmers may disagree with you.

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