Investment optionsAust, NZ $ deposits 'attractive'Good returns given weaker baht, low interest rates: banks

With the baht expected to decline until the middle of the year, the total return - foreignexchange gain and interest - from putting money in an Australiandollar deposit account could be up to 19 per cent, Standard Chartered Bank (Thai) said.

However, there is definitely high volatility in this type of saving option, so investors should be ready to take high risk. Savers should also seek expert advice about the right timing for this kind of investment.

Some economists forecast the baht declining to 37 per dollar by midyear before strengthening to 35.50 at yearend.

Auraratana Jutimitta, general manger for consumer transaction banking and wealth management at Standard Chartered Bank (Thai), recommended investors who are familiar with equity investment to allocate some of their money to foreigncurrency deposits in Australian dollars and New Zealand dollars. AUD and NZD fixed deposits currently offer 3 per cent and 3.5 per cent, while AUD and NZD savings deposits are paying 2 per cent and 3 per cent.

AUD accounts were more recommended as Australia has a bigger economic system than New Zealand, so the volatility of its currency was lower, she said.

"Currently these currencies trade at Bt23 per AUD and Bt18 per NZD, while according to the view of the bank, they are likely to rise to Bt26 per AUD and Bt23.6 per NZD in the second quarter and Bt28 per AUD and Bt24.1 per NZD in the fourth quarter of this year.

Therefore, investors could get a profit on currency exchange of up to 19 per cent for AUD and 24 per cent for NZD," she said.

The governments of those two countries would not let their currency weaken against US dollar too much, as they still rely on foreign investment. Their exports are affected by the global economic crisis less than Thailand. Therefore, AUD and NZD are supposed to be stronger against the baht, she said.

Yesterday, the Reserve Bank of Australia lowered its benchmark rate 1 percentage point to 3.25 per cent, two hours after the government's US$26.7billion (Bt939 billion) stimulus package was announced.

However, Auraratana said the Australia economy could turn to recession and its central bank may cut the interest rate to bottom out at 2 per cent. And the policy interest rate of New Zealand is likely to bottom out at 2 per cent, so the return from this kind of investment will decline.

Despite this, their expected bottom rates are still higher than the Thai policy rate, which is forecast to bottom out at 1 per cent. Besides, the US dollar would grow stronger against those currencies but less so against the baht, she said.

US dollar deposits are not that interesting due to their low interest rate, she added.

Parames Promburee, executive vice president of marketing and product development at Kiatnakin Bank, said AUD and NZD deposits were more interesting than the other currencies because they offered higher interest rates than the local rate in Thailand.

However, investors could suffer a loss from foreign exchange and the interest paid might not cover the loss. Investors should ask experts about the right time to invest, he said.

Besides, Standard Chartered, many banks are offering AUD deposit accounts, such as Kasikornbank and Siam City Bank, which offers a saving rate of 2 per cent and a three-monthfixed deposit rate of 2.85 per cent.

Bangkok Bank and Bank of Ayudhya offer a savings rate of 2 per cent and threemonthfixed deposit rate of 2.75 per cent. Thanachart offers the highest savings rate at 3.6 per cent and three-monthfixed deposit rate at 5.25 per cent.

Krung Thai Bank and Siam Commercial Bank quote a savings rate of 2.5 per cent, and a three-monthfixed deposit rate of 3 per cent. Besides, they offer NZD deposits with the savings rate at 2.2 per cent and threemonthfixed deposit rate at 2.4 per cent.

Usara Wilaipich, senior economist at Standard Chartered, forecasts the baht weakening to 37 per greenback in the first half of the year and recovering in the second half to 35.50.

"The current account of Thailand will run more deficits this year because the income from exports and tourism will shrink because of the global economic slowdown. Last year the current deficit stood at minus 0.5 per cent of gross domestic product, and it is expected to be minus 1.8 per cent of GDP this year as exports will drop by at least 5 per cent," she said.

Funds from Western countries are not expected to flow into the Asian region this first half year. However, their aggressive monetary and fiscal policies to boost growth may take effect in the second half. Therefore, the baht may be a little stronger in the second half.

Businessmen with foreign debts and importers should protect themselves against risks before the baht sinks further, she added.