Thailand eases curbs on overseas investment

Tuesday, 1 September 2015 00:51 - - {{hitsCtrl.values.hits}}

Reuters: Thailand’s central bank on Friday relaxed curbs on investment in foreign securities and said it had the capacity to manage capital outflows that may follow even as the baht hovered at its lowest level for more than six years.

Thai authorities have been encouraging a weakening of the baht in a bid to aid exports, which have slumped for years. The measures announced on Friday are a follow-up to one of the moves, an April announcement that restrictions on fund outflows would be relaxed.

Starting from 2016, the central bank will allow Thais with liquid assets of more than 100 million baht ($ 2.8 million) to invest up to $ 5 million a year directly in overseas securities, Deputy Governor Pongpen Ruengvirayudh told reporters.

From 2017, Thais will not be required to hold any liquid assets before making the investments, she said.

Thai firms with assets of between 1 billion and 5 billion baht can also directly invest in overseas securities, up to $ 5 million per year, from 2016.

“The move had some psychological impact,” a dealer at a Thai bank said. “It makes people think the baht will get weaker, so importers are buying dollars.”

The central bank moves added to the weakening trend for the baht due to expectations that the US would soon hike interest rates, he added.

Will take time

The Thai currency has depreciated about 8.2% against the dollar this year. The fall has not been too much and reflects a weakening of Thailand’s economic fundamentals, Pongpen said.

It would take time before the rule-relaxation on overseas investments had much impact on capital outflows, she said.

“Thailand had curbed investments overseas for a long time, so it will take a while for Thai investors to be confident to go abroad,” she added.

Southeast Asia’s second-largest economy has struggled to break out of a slow growth cycle since the army seized power in May 2014 to end political unrest. Growth was just 0.9% last year.

Exports and domestic demand remain weak while last week’s deadly bomb blast in Bangkok hurts the economy’s one bright spot, tourism.

The Finance Ministry said on Friday it expected the blast to cut tourist numbers by 300,000 and economic growth by 0.05 percentage point this year.

The ministry still expects economic growth of 3 percent this year, helped by government stimulus.