Thailand Lifts Most Capital Controls, Saying Baht Stabilized
Thailand Lifts Most Capital Controls, Saying Baht Stabilized
By Anuchit Nguyen and Beth Jinks
March 1 (Bloomberg) — Thailand is lifting most remaining restrictions on investments by foreigners after imposing curbs in December to cool gains in the baht, central bank Governor Tarisa Watanagase said.
Curbs on foreign investments in baht-denominated bonds, mutual funds and property funds will be removed today as long as overseas investors take hedging measures to avoid profiting from baht fluctuations, Tarisa said in a speech to the Foreign Bankers’ Association in Bangkok late yesterday.
The December restrictions triggered the stock market’s steepest decline in 16 years, dealing a blow to the military- backed government’s credibility with investors. Tarisa’s announcement capped a frenetic day in which the finance minister quit, interest rates were cut and Thailand’s benchmark stock index fell amid a rout in Asian stocks.
Easing the rules “shows they can recognize their mistakes,” said Julian Jessop, chief international economist at Capital Economics in London.
The baht gained the most among 15 Asia-Pacific currencies tracked by Bloomberg in 2006, rising 16 percent. The gains made Thailand’s goods more expensive abroad, sparking an outcry from the nation’s exporters.
Regional Currencies
“We are quite comfortable with the baht movement right now, as it is moving in line with regional currencies, not only strengthening,” Tarisa said. “The exemption of hedged investments will not make baht volatile again” as it removes currency bets.
In December, Thailand’s regulators required banks to lock up 30 percent of new foreign currency deposits interest free for a year to stop investors speculating the baht. Investors who wanted to withdraw investments after less than a year were required to pay a penalty of 33 percent of the reserved amount.
Under today’s rules, investments must be hedged against currency changes for 12 months and shorter-term inflows must be hedged for the life of the investment, Tarisa said.
Thailand’s central bank yesterday cut its benchmark interest rate for a second time this year to spur growth in Southeast Asia’s second-largest economy after terrorist attacks and the investment rules shook confidence.
The decision to cut the one-day bond repurchase rate to 4.5 percent from 4.75 percent came less than two hours after the Finance Minister Pridiyathorn Devakula resigned.
Pridiyathorn said he disagreed with “some” Cabinet ministers and this month’s appointment of Somkid Jatusripitak, former deputy to Thailand’s deposed premier, as an economic adviser. Somkid resigned after a week in the job.
No replacement was named for Pridiyathorn, a former Bank of Thailand governor who was tapped as finance minister to buoy confidence after the Sept. 19 military coup.
To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net
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Thai baht hits new nine-year high
BANGKOK: — The Thai baht hit a new nine-year high against the dollar on Wednesday amid growing speculation that the army-backed government will soon lift controversial currency controls, dealers said.
The Thai currency reached 35.07 to the dollar in early morning trade, up from Tuesday’s finish at 35.14-15.
The baht has risen nearly 12 percent over the past year, prompting the government to impose the capital rules in December in a bid to halt the currency’s rise which has been dampening exports.