He said trading volume in currency now stood at around US$300 million (Bt103.5 billion) per day compared with around $1 billion before the 30-per-cent capital-control measure was announced.

In 1996, before the country's 1997 financial crisis, trading volume per day was around $4 billion. In a normal situation, the volume per day is around $500 million at least. The volume reduction was mainly caused by the Bank of Thailand launching its withholding measure in December last year.

In the first quarter this year, Kasikornbank recorded a 111-per-cent increase year on year, the highest growth rate in foreign-exchange gains among the country's large banks.

"The stronger baht will soften in the second quarter due to the downward trend in interest rates. Also, importers have bought the US currency in longer-term transactions with the expectation that the baht will weaken further against the US dollar," Songpol said.

As a result, bank customers who are importers have also covered their foreign-exchange risk by hedging. That made the hedging ratio increase to around 40 to 50 per cent of total import volume from 30 per cent last year. Bank customers who use hedging are mostly large firms that have minimum sales of Bt4 billion per annum.

Despite a net buy of overseas investors into the stock market, Songpol believes foreign capital will not flow in significantly at present as a high amount of foreign funds still remains in Thai capital markets.

"Right now, foreign fund managers won't invest for the long term in each market, but they shift investments between the stock and bond markets. Thus foreign capital is still in the country and it doesn't have an impact on the baht," he said.

Separately, the bank's first senior vice president Piti Tantakasem said funding mobilisation by large Thai companies was expected to increase in the second half of the year from both bank loans and bond issuance. This situation is likely to be driven by the energy sector.

As the government plans to open

bidding for power plants, this will also boost fund-raising activities in the country, he said.

Somruedi Banchongduang

The Nation