Author Topic: Strong baht to deliver Bt66 bn hit  (Read 208 times)

Offline thaiga

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Strong baht to deliver Bt66 bn hit
« on: June 14, 2019, 01:18:20 PM »
Strong baht to deliver Bt66 bn hit

THE strengthening baht could wipe as much as Bt66 billion off the value of Thailand’s exports this year, research shows.

After a rocky start to the year, the outlook for exporters is set to worsen, according to the research unit of TMB Bank, which points to the monetary easing of central banks in major economies – including the United States, Europe and Japan – that could push the baht to a further 5 per cent gain by the end of this year.

TMB Analytics said exports - excluding gold and weapons - contracted by 4 per cent year on year in the first four months of this year. For the rest of the year, exporters face heightened risks and fluctuation in value in light of uncertainties from the trade sparring between the US and its major trading partner countries, notably in Europe and China.

The baht is projected to stay at 31.2 to the US dollar until the end of this year, up 5 per cent from last year.

 The expected baht appreciation of 5 per cent could cut companies’ profits by about Bt17 billion.

Those business sectors that rely on export income and use local materials will suffer the worst impacts, with an estimated income loss of Bt66 billion and a projected gross profit margin drop of 0.3-3.2 per cent. This group includes producers of rubber products, seafood, meat and accessories.

Expected to benefit from the situation are those businesses that distribute products locally and import raw materials. They will gain from an estimated reduction in imported materials of Bt62 billion, and an increase of 0.3-4.9 per cent in gross profit margins. This group includes producers of machinery and parts, steel and other metals, electrical appliances, textiles, and medical products and equipment.

Those reliant on export income and import raw materials will not experience impacts, due to the effect of a natural hedge. This group includes producers of auto parts, beverages and chemical products.

Businesses engaged in agriculture that rely mainly on exports and use local materials have been pressured by the baht’s appreciation, as well as from existing problems including low prices, high competition and sluggish global markets, said Jitipol Puksamatanan, a strategist at Krungthai Bank.

If the baht continued its appreciation several business sectors - particularly small and medium-sized enterprises (SMEs) - will be affected or, at the worst, shut down their operations, he said.

 “If the situation continues, and Thailand still faces a current account surplus, the baht will likely appreciate further. Management must focus on the long term. It’s difficult to [imagine a scenario where we] have a chance to see a baht depreciation. We have to find ways to develop products to compete with others,” he said.

Based a survey by The Nation, the baht switched to a sharp appreciation after the US Federal Reserve signalled more monetary easing, which promoted market expectations for two to three possible interest rate cuts this year.

Within the region, the baht hit its highest level in more than 25 years against the Malaysian and Indonesian currencies. It was trading at 7.50 to the ringgit, marking a gain of 42.3 per cent from its previous high of 12.99 per ringgit. At 2.19 to Indonesia’s rupiah, it is up 82.6 per cent from its prior high of 12.60.

Against the Indian rupee, the baht was trading at its highest in 21 years and seven months, at 0.45 to the rupee. This represents a jump of 62.5 per cent from its last high at 1.40 to the rupee.

 The baht has appreciated against Vietnam’s dong by the most in 20 years and four months, at 0.0013 per dong. This is up 99.9 per cent from its last high at 2.71 per dong.

Against the Philippine peso, the baht is at its strongest in 20 years, rising to 0.6 per peso, up 40.6 per cent from its last high at 1.01 per peso.

Farther afield, the Thai currency has appreciated against the British pound by the most in 22 years and four months, at 39.7 to the pound. This is up 56.2 per cent from its last high at 90.72 to the pound.

 Against the Australian dollar, the baht has gained the most 18 years and six months to 21.70, up 41.2 per cent from its last high at 36.90 to that unit.
Anyone who goes to a psychiatrist should have his head examined.

Online coolkorat

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Re: Strong baht to deliver Bt66 bn hit
« Reply #1 on: June 14, 2019, 05:06:30 PM »
Thaiga, I wonder if this will have any impact on the government, and perhaps prompt some moves towards devaluation? With foreign currency reserves of over US$200b there should be major investments in infrastructure (and there certainly are major projects) but some of this sovereign wealth could also be directed towards creating better relations with Thailand's direct neighbours. It should also be directed to education, IT and digital, and environmental improvements. Possibly Thailand has never 'had it so good', and this dividend should be used now for the benefit of future generations.

Online Taman Tun

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Re: Strong baht to deliver Bt66 bn hit
« Reply #2 on: June 15, 2019, 10:41:36 AM »
there should be major investments in infrastructure

Yes, I hope there will be lots more investment in rail projects in order to keep me employed well into my dotage.
However, I think that the infrastructure investment which will most benefit Korat is the M6 motorway which will really speed up journeys into Bangkok.  The M6 should open next year and will deliver far greater benefits than high speed rail or double tracking.
If the old only could, if the young only knew.

Offline thaiga

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Re: Strong baht to deliver Bt66 bn hit
« Reply #3 on: June 15, 2019, 01:48:29 PM »
Thaiga, I wonder if this will have any impact on the government, It should also be directed to education, Thailand has never 'had it so good'
Hi CK  nice to hear from you, yes education is a wonderful thing, but alas TIT how many kids get killed every day on the roads and what is done about it.
that should be given some thought. Road accidents remain the second leading cause of death for children in Thailand, especially motorcycle accidents, which account for more than 70 percent of all road deaths. so many of these tragedies can be prevented.

another thing why mess about with peoples bank account ( visa wise ) when the poor old expat is being battered already @ exchange rates, brexit and the likes of, WRONG TIMING, that's not clever. did i say education is a wonderful thing, can you imagine everyone here being top notch educated, they might start seeing into things they never see before. now that wouldn't do would it.

my regards to derek i hope he has a full recovery, TTFN.

PS: don't forget the  Tum Yum Kung Crisis :-[
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Offline thaiga

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Re: Fed pushes baht to 6-year high
« Reply #4 on: June 22, 2019, 09:03:28 PM »
Fed pushes baht to 6-year high

THE baht has hit a six-year high, propelled to 31.05 to the US dollar yesterday after the US Federal Reserve signalled possible interest rates cuts of as much as half a percentage point over the rest of this year.

The Fed’s flagging of monetary easing comes in response to increased economic uncertainty and a drop in inflation expectations. That was enough to push the baht to its highest since October 2013.

At a meeting on Wednesday, the Fed kept interest rates on hold in a 2.25-2.5 per cent target range, amid the US economic uncertainties and the trade tensions with China.

The president of the St Louis Fed, James Bullard, voted against his colleagues by seeking a 25 basis point cut in the benchmark interest rate.

 Bank of Thailand or BOT’s assistant governor financial markets operation group Vachira Arromdee said that BOT has monitor baht strong within two weeks that is following the both internal and external factor that impact to baht currency strong when compare with others currency in this regional.

However, if baht still strong higher than others currency by did not relate with the country’s economy based and may be impact with the real economy and the country’s industry, the BOT will restrict with all of financial transaction that has signed to use Thailand to be short-term money supply to speculate on the baht, she said.

However, BOT warning private sector to manage their financial risk that will impact from external factor that may be impact with the country’s currency, she said.

“In this time is the best time for private and publics sector pay back their loan or their expansion such as invest to buy machinery or investment in term of foreign currency that will benefit for the business when baht strong,” Vachira said.

Jitipol Puksamatanan, chief markets strategist at Krungthai Bank, said it was noteworthy that one Fed member voted for a rate cut, with seven of the Fed’s 17 policymakers foreseeing the rates cuts amounting to 50 basis points this year.

The Fed also introduced some new phrasing in its announcement, describing the economy moving to moderate economic growth from solid growth, while inflation still held below 2 per cent. It added the word “uncertainties” and dropped “patient” from its statement, suggesting the Fed’s main attention is with the economic uncertainties.

US stocks rose after the statement, with the S&P500 Index edging up 0.3 per cent. The yield on 10-year US bonds fell 3.3 basis points to 2.03 per cent. The US dollar depreciated against all assets - from the major currencies to crude oil and gold.

Risk appetite growing

The baht is believed to have gained support from capital markets, which are open to more risks and the prospects coming from a clearly easing US monetary policy.

Major risks to US dollar’s continued depreciation are the trade negotiations and the US economic slowdown as a result of the political uncertainty. The Thai currency is forecast to stay in a range of 31.15 to 31.25 to the US dollar.

The Stock Exchange of Thailand Index yesterday continued its rise after surpassing 1,700 points on trade value of Bt107.56 billion on Wednesday. It ended yesterday at 1,717.82 points, up 11.84 points - or 0.69 per cent - from Wednesday’s close. The trading value was Bt75.52 billion. Foreign, institutional, and proprietary investors made net purchases of Bt4.48 billion, Bt1.49 billion, and Bt367.09 million, respectively.

On the domestic economic front, Thanavath Phonvichai, director of the University of the Thai Chamber of Commerce, said that the TCC Confidence Index in May fell to 47.4 from 47.8 in the previous month.

The index is compiled from a survey of chairmen and directors of chambers of commerce nationwide from May 29 to June 5.

The National Economic and Social Development Council’s announcement of a drop of in economic growth for the first quarter of this year - to 2.8 per cent from 3.6 per cent in the same period of last year - was cited for a decline in the confidence levels.

Other negatives that eroded confidence included a year-on-year drop of 2.57 per cent in exports for April, the SET Index’s 53.3 point slump, concerns over the escalating US-China trade war, Thailand’s rising cost of living and the high prices of products and services. Also cited was the imbalance between people’s incomes and their costs of living.

However, some factors give cause for optimism, such as the Monetary Policy Committee’s recent decision to hold the policy rate steady at 1.75 per cent, along with the slight baht appreciation to 31.796 per US dollar at the end of May from 31.86 at the end of this April.

Also helping is an improved outlook for tourism, higher agricultural production to meet increased market demand, and the government’s measures to enhance farmers’ efficiency.

Business operators have urged the government to ease the high living costs for ordinary people as part of efforts to reduce income inequality, while stimulating public investment.

Advances in the country’s transport system should be pushed to increase connectivity and help spur economic expansion. More efforts are also being sought to promote new export markets for agricultural products amid the US-China trade war. Tourism destinations in smaller communities should be promoted, alongside support for greater marketing opportunities for the products under the One Tambon, One Product scheme, business leaders say.
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Offline thaiga

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Bank of Thailand eyes measures to curb hot money

The Bank of Thailand (BoT) is set to implement measures to curb hot money following the baht's rapid gain.

"The measure is expected to be taken soon. The central bank already has measures to take care of the foreign exchange rate," said Monetary Policy Committee secretary Titanun Mallikamas.

The central bank has closely monitored offshore fund inflows, especially those flowing into short-term bonds, he said, adding that the inflows could be for both speculation and investment purposes as Thai bonds are considered to be safe haven assets.

The rate-setters expressed concern that the baht's rise might not be consistent with economic and fundamentals and would continue closely monitor developments of exchange rates and capital flows, he said.

The baht is the top performing currency in Asia with a roughly 5.5% gain against the greenback this year. The rapid appreciation has prompted worries that it is eroding the country's competitiveness and deepening the export slump.
Anyone who goes to a psychiatrist should have his head examined.