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Resurgence of foreign capital inflows seen

THAI BANKERS expect capital to flow back to Asia's emerging markets from Europe and the United States because of the dissipating effect of US tapering of its quantitative easing (QE) programme, the escalation of geopolitical risks in Europe, and increases in political and investment certainty in Asia.

Speaking at a seminar arranged by the Stock Exchange of Thailand and Standard Chartered Bank (Thailand), Usara Wilaipich, a senior economist at the bank, said the baht had the potential to strengthen to 31-31.50 per US dollar next quarter on inflows of foreign capital to the stock and bond markets.

She said the baht lost strength between the second half of last year and June as a result of market reaction to last year's QE tapering and the political turmoil in Thailand. But the markets in the region including Thailand market had already absorbed the effects of QE tapering and the political chaos in the Kingdom had died down.

"The baht has rapidly strengthened since June from almost 33 per dollar to 31.75 last week because foreign investors saw that many things got better in the past two months after the coup and they gained confidence in the country's future and its economic recovery."

Usara said foreign investors had previously strongly underweighted investment in the Kingdom and the amount of foreign assets in the country was the lowest in the region. But since Thailand's economy began to turn around sharply, which meant the earning prospects would be much better, foreign investors would have to take another look at this country.

"More foreign funds will flow into Asia's bond markets, including Thailand's, because of the developments in Ukraine, along with Russian and Western sanctions against each other, the political situation in Israel, and the banking problem in Argentina," she said.

Adithep Vanabriksha, chief investment officer of Aberdeen Asset Management (Thailand), said the outflow of foreign capital from emerging markets in Asia last year was largely due to QE tapering, but lately the inflow of funds into developed markets had become static. He said the funds were beginning to flow towards emerging markets because of their valuation and the economic recovery of countries in the region.


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