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Published on July 13, 2007

Individual Thai investors will be encouraged to invest abroad as a way to ease pressure on the baht, which continues to sky-rocket.

A working committee led by representatives from the Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC) yesterday agreed in principle to promote individual Thai investors' portfolios abroad.

SEC secretary-general Thirachai Phuvanatnaranu-bala said after yesterday's meeting that there was agreement on promoting Thai individual investment abroad in the belief it would help ease the rise of the baht against the US dollar.

"We should reach a conclusion on this plan soon," he said.

Aside from the BOT and SEC, the working group included representatives from the Stock Exchange of Thailand (SET), the Association of Securities Companies and the Association of Investment Management Companies.

Thirachai said the working group would study how to amend the law to open up investment abroad.

"This will be a long-term plan," he said, adding that personally he would like Thai individuals to trade more in both onshore and offshore markets.

In supporting the plan, there should not be a fixed investment pattern, Thirachai said.

"The central bank's role in this regard should be limited to the ceiling of the investment," he added.

The baht yesterday continued its upward rise, ending at 33.32/33.34 against the US dollar, said one dealer at Siam Commercial Bank. It opened at 33.30/33.33, after closing at 33.31 the day before.

The baht's continued appreciation has startled all parties, particularly garment manufacturer Thai Silp South East Asia Import Export, which has shut down its plants, citing the strength of the baht as the reason.

The Thai Chamber of Commerce yesterday urged the Monetary Policy Committee (MPC) to slash its policy rate another 25 basis points, in order to help slow capital inflows. The MPC will convene next Wednesday.

Chamber representatives said the strong baht had created a chain effect throughout the entire economy.

"The government must seek measures to stabilise the baht's value in the long term, and a decrease in interest rates will relieve the fiscal burden. This could be a short-term remedy," said a one representative.

He also noted that if the baht maintained its upward movement, more businesses, particularly small- and medium-sized enterprises, would close.

Deputy BOT Governor Atchana Waiquamdee yesterday said this issue would be considered thoroughly. She also noted that the central bank might have to look at the economic-growth forecast, to determine whether the projection will be affected by the baht's continued appreciation. She admitted that the current gross domestic product forecast did not factor in the effect of the baht's continued rise.

Chamber chairman Pramon Suthivong yesterday said the strong baht had affected exporters and that more small factories would be forced to shut down.

He said he did not know why Thai Silp had closed but believed the currency issue was just one factor, because the company could have borne its financial problems. Still, he admitted the baht's strength had caused losses for exporters, especially those in the textile industry.

"More small factories will shut down, because when the baht is about 10-per-cent more expensive than the currencies of neighbouring countries, such as Indonesia and Vietnam, Thai exporters cannot compete with them," he said.

Next Monday, the Chamber of Commerce will seek a meeting with Commerce Minister Krirk-krai Jirapaet to ask whether he plans any remedial measures. Pramon noted that the private sector might need to raise their product prices and consequently see their shares in export markets slashed. Meanwhile, exporters will need to replace machinery, in order to reduce production costs, and the government could help through a cut in machinery import tariffs.

Regarding the BOT's claim that exporters' sales of dollars had spurred the baht's appreciation, he admitted that such selling had occurred.

"But it should help alleviate the situation if the Bank of Thailand allows exporters to hold onto their foreign-exchange income for more than 15 days [before they are required to convert the income into baht]," he said.

The BOT has so far attributed the strong baht to heavy capital inflows into the SET. For two weeks, the market's daily turnover was about Bt40 billion. BOT Governor Tarisa Watanagase earlier placated the market by saying this was unusual and should end soon.

After a continued hike in the past seven trading days, the Thai market experienced contractions on Wednesday and yesterday. Yesterday, Thai share prices closed 0.28 per cent lower on the selling of export-linked stocks as the local currency hit a fresh 10-year high against the dollar, dealers said.

The SET Composite Index fell 2.41 points to 843.87.

Siriporn Chanjindamanee,

Petchanet Pratruangkrai

The Nation