• 
• 

Published on July 25, 2007

The private sector had mixed views on the government's new measures to stem the baht's rise announced yesterday. Some business sources believe the measures are a move in the right direction, but some said they are too soft compared to the extent of the baht's appreciation so far.

The responses came after the government and the Bank of Thailand announced six measures to stem the baht's rise.

The Thai currency, which has been depreciating over the past few days, was again slightly stronger yesterday.

A dealer from a local bank said that after the Cabinet announced the measures, the baht strengthened by Bt0.10 against the dollar. It reached a peak yesterday of Bt33.58, up from Bt33.69-33.71 when the market opened.

The baht closed yesterday at Bt33.62-33.64.

The dealer said the measures were not a surprise to the market as the plan had already been publicised earlier. Hence, many investors had converted their dollars into baht.

The Thai Listed Companies Association yesterday expressed a positive view on the government's measures, saying they will make business operations more flexible.

Pensri Suteerasarn, president of the association, said the association has surveyed 120 listed firms including securities firms, listed companies and commercial banks and found that most of them believe the government's measures will provide a good solution.

Khunying Jada Wattanasiri-tham, a board member of the Stock Exchange of Thailand, said the measures reflect the fact that the Thai authorities recognise the need to take action to solve the currency problem.

The measures would help support business operators as well as investors who want to invest abroad. However, she believed the results would be seen in the medium and long term rather than the short term.

"Business operators will benefit from the measures as they open the door to overseas investment.

"However, businesses need to adjust more. They will benefit from the baht's appreciation as they can buy machine tools and technology from abroad to boost competitiveness," Jada said.

The measure to allow listed firms to invest up to US$100 million abroad would add a variety of investment channels for those companies.

Montree Sornpaisarn, CEO of Kim Eng Securities (Thai-land) Plc, said the measures announced yesterday are suitable and have not affected the capital market. He believes the measures are only short-term as business operators need to adjust to the situation.

According to the association's survey results, 40 listed export companies have been affected by the baht's appreciation and 80 per cent of them had already hedged funds to cover currency risk, Pensri said.

In a separate development, Bunluasak Pussarungsri, executive vice president of Bank-Thai, said the BOT's measures would only help to make the baht weaker in the short term.

He said the measures are too soft compared to the scale of the problem.

He said several of the measures would not benefit either individuals or companies. He said the measure to allow resident corporations and individuals in Thailand to deposit foreign currencies with financial institutions in Thailand is too late to attract depositors as the baht has already become too strong.

"The stronger baht is already a big problem, thus it needs tough management. But the BOT is too worried about taking strong action," he said, adding that he expected more measures would be implemented later. 

However, he said the stronger baht is in line with the country's economic fundamentals, especially the current account surplus. Thus, the government should boost investment and consumption to make the baht depreciate.

Bunluasak recommended that the government cut value added tax by two per cent and the central bank cut the policy signal rate by 100-150 basis points to stimulate consumption and investment.

Chartsiti Sophonpanic, president of Bangkok Bank, said the BOT's measures would help balance demand between the baht and foreign currencies. Bang-kok Bank is ready to receive deposits in foreign currencies, in compliance with the BOT's decision.

Adirek Sripratak, president and chief executive officer of Charoen Pokphand Foods Plc, said the measures would alleviate the pressure on Thai industry. However, they could not help stabilise the baht permanently.

The government should consider other concrete financial policies to cope with the fluctuating exchange rate.