Baht highest since July 1997
Thai baht today briefly touched 29.14 per US dollar, the highest point since July 1997 when the currency was devalued, due to huge capital inflows.
Data compiled by Kasikorn Research Centre showed that year to date, net foreign investment in Thai bonds reached Bt259 billion against Bt65 billion in the stock market. The Thai baht has so far this year appreciated over 4 per cent against the greenback.
Nomura said in a recent research that there is a room for further appreciation on the Thai baht based on fundamentals. It is convinced that this may weaken over the medium term given the likely narrowing of the current account surplus because of the strong domestic economy.
Despite the increase in foreign positioning in the local bond and equity markets risen, it noted that the holding remains relatively light. Foreign holdings of Thai government bonds stood at US$16.2 billion (16.4 per cent of total) at the end of December. At the level, it was low compared to foreign ownership levels in other parts of the region, such as Indonesia and Malaysia (over 30 per cent and 40 per cent, respectively). Foreign equity positioning in Thailand was also arguably low at 20.7 per cent of market cap as of January 2013 and 4.2 per cent below the peak before the 2008 financial crisis, Nomura noted.
KResearch estimated that every percentage appreciation in the Thai baht may shave the Thai economic growth by 0.30 percentage point.
The research house earlier expected the baht to end the year at 29.50 on the back of 10.5 per cent export growth forecast and 4.8 per cent economic growth forecast.
However, if the baht rises to 28.90, the export growth will slow down to 6.5 per cent while the economy will expand by only 4.2 per cent.
If the baht rises further to 27.90 this year, the export and economic growth forecasts will fall to 2.5 per cent and 3 per cent, respectively.