BOT Assistant Governor Nitaya Pibulratanagit said foreign capital continued to flow into the Kingdom, particularly into the Thai bourse, which has pushed up the Stock Exchange of Thailand (SET) Index over the last few days. Last week, the SET surged to stay firm above the psychological 700-point barrier, mainly from net foreign buying.

Foreign investors have also brought in money as direct investment.

The foreign inflows continuing since last year paint a positive picture despite the central bank introducing the remunerated reserve requirement last December.

In the first two months of this year, net foreign direct investment totalled US$2.44 billion (Bt84.79 billion), slightly higher than the $2.1 billion in the same period last year.

However, net inflows into the stock market totalled only $1.47 billion, less than half of the US$3.1 billion on inflows in the first two months of last year.

"Capital has continuously flowed into the stock market and also as direct investment, because both channels are waived of the 30-per-cent requirement," said Monetary Policy Group director Mathee Supapongse.

However, the debt market showed net outflows of $695.5 million, higher than the $141.9 million in the first two months of last year.

Mathee said the debt market experienced net outflows because the central bank had not yet waived the capital-reserve requirement for the debt market, instead requiring them to hedge their new capital flows fully to avoid the reserve requirement.

As a result, only a small amount of capital had flowed into the debt market.

In addition, foreign investors were also trying to make a profit in the debt market, because interest rates had declined and prices surged, said Mathee.

In mid-March, the BOT also provided an option for non-residents to hedge their money fully instead of being subject to the 30-per-cent reserve requirement.

The BOT reserve requirement, however, has reined in the appreciating baht significantly, as the currency has moved with stability above 35 to the US dollar.

A source said the strong baht had also encouraged debtors to repay their foreign debts, because they could buy dollars for fewer baht now.

In the first two months, borrowers had triggered net outflows of $634.42 million, compared with net inflows of US$951.8 million in the first two months of last year.

In addition, the government also repaid its foreign debt, because it wanted to restructure from short-term debts to longer-term debts, said Mathee.

Anoma Srisukkasem

The Nation