KASIKORNBANK views the Bank of Thailand to create a balance and care for the baht
Kasikorn Research Center looks at measures to take care of the baht Focus on creating a moving capital balance, expected next year appreciation of 30 baht / dollar
The KASIKORN RESEARCH CENTER said that the Thai capital markets throughout 2020 have been increasingly affected by volatility trends and risk factors in the global financial markets, which recently re-invested in the assets of the emerging markets as a whole. Both Thailand after the US presidential election and there is more hope for the development of a vaccine against COVID-19.
If counting between 1-19 November 20, the total capital flows into the stock market and bonds totaling 6.9.7 billion baht, the highest level in 17 months, while the baht hit the strongest level. Around 10 months at 30.14 baht / $ before moving back to 30.30 baht / $ today, the baht situation is one of the concerns. Because the appreciation of the baht at this time may affect the recovery path of the business sector and the Thai economy as a whole, therefore, the Bank of Thailand (BOT) has issued measures to monitor the movement of the baht. In this round, the focus is on strengthening mechanisms in the exchange market ecosystem. By dividing the measures into 3 issues:
1. Release of criteria for opening a foreign currency deposit (FCD) account for Thai citizens
2. Expanding credit limit and types of foreign securities that Thai investors can invest in; and
3.Provide the registration of identification for buying-selling debt securities (Bond Pre-trade Registration)
This is in line with the operations of many Asian countries such as South Korea, Malaysia and Taiwan, which are open to moving capital. And investors can buy-sell debt instruments freely, but must have clear identification.
The Kasikorn Research Center views that the BOT's measures to look after the baht Focus on the goal of balancing inbound-outbound capital flows. To prepare for the flow of capital flows That may have the opportunity to flow to invest in the Thai financial market more in the future
However, it may take more time. To monitor the effectiveness of such measures in the future Especially to increase the flexibility of investing in foreign securities for Thai investors (To increase the purchasing force of foreign currency Slow down the baht appreciation) because the diversification of investment portfolios depends on the rhythm and the international market conditions Comparing rewards to compensate for the increased risk. Including knowledge and understanding of investing in foreign securities for the case of retail investors While determining the identity verification criteria before trading debt slotxo instruments May help reduce the volatility caused by the short stay of foreign investors. Which will affect the movement of the baht in some periods But this is not a measure to extract capital inflows. In addition, the fundamentals from the current account surplus trend. May encourage the baht to have a chance to appreciate While the dollar It may tend to further weaken during the next year. According to quantitative easing And signs of the Federal Reserve's continued low policy interest stand
Kasikorn Research Center expects Thai baht has a chance to appreciate at the level of 30 baht / dollar in 2021 (by Kasikornbank estimates Thai baht at the level of 29.00-29.25 baht / dollar at the end of 2021), therefore, the BOT may need to take care of the foreign exchange market to reduce short-term fluctuations. And assess the necessity of further adoption of measures to protect the baht in the future