Thailand - SET Crashes

K2 · #1 19-12-2006, 12:49

BoT has imposed harsh controls on foreign currency deposits -

"The Bank of Thailand on Monday ordered banks to lock up 30 per cent of any new foreign currency deposits above 20,000 dollars for a year in an effort to curb inflows of funds pushing up the local currency.

Such deposits would carry no interest and a third of the funds would be forfeit if they were withdrawn before the one year was up."

Stock market being fueled by hedge fund flows has crashed 12% today ... if you are sending moneyt o Thailand - watch this carefully.

Offshore overnight THB trading at 158% (onshore at 5.25%) - this is nasty and finally may be seeing unravelling of Thailand as proxy China trade.

Further (Bloomberg)

Lock Up

Starting today (19/12/06), overseas investors buying the baht will only be able to invest 70 percent of what they transfer and recoup all of their funds if they keep the money in Thailand for more than a year. Those who withdraw the reserved amount in less than a year will be fined 33 percent of that 30 percent portion.

A stronger baht hands overseas investors greater capital returns when they convert proceeds from sales back to dollars or their own currencies. China's yuan has added 3.1 percent against the dollar this year, Malaysia's ringgit has gained 6.3 percent and Singapore's dollar has climbed 7.9 percent.

``It's basically as if they're putting a tax on any trades less than a year,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``It's going to stop any buying pressure and with the stock market likely to be hit, we could see the baht falling some more.''

Nicke · #2 19-12-2006, 13:08

Sorry for a dumb question,

Does this affect all money transfers into thailand or just accounts inside Thailand with a foreign currency?

It basically means that anyone who want to buy a house or do any other investment have to send 30% more than they want to spend now. And after a year can withdraw the remaining 30%.

K2 · #3 19-12-2006, 13:15

Quote:

Originally Posted by Nicke

Sorry for a dumb question,

Does this affect all money transfers into thailand or just accounts inside Thailand with a foreign currency?

It basically means that anyone who want to buy a house or do any other investment have to send 30% more than they want to spend now. And after a year can withdraw the remaining 30%.

From BoT statement .. ALL transfers from banks OUTSIDE Thailand on amounts over $20,000 are subject to this rule.

This ruling does not affect transfers (interbank) within Thailand.

So yes - anyone buying a house or doing other business would need to keep the transfrred money (exchanged into THB) within Thailand for a minimum of 1 year or incure a penalty on 30% of the sum transfrred.

Malaysia did a similar thing in 1998 and was only fully lifted when they allowed the currency to float again last year.

This is bad and BoT looks serious about it - alreday of the Democrat leaders (Korn) has called for the move to be reversed.

Would look for THB to weaken - if SET keeps falling could be some oppotunities to pick up some cheap stocks though.

river · #4 19-12-2006, 14:27

Bound to have an effect on real estate especially those developments targeting foreign ownership.

Just about anyone bringing in money to buy a business or whatever, crazy.

stevem · #5 19-12-2006, 14:32

Thats not very friendly

Bobby · #6 19-12-2006, 15:09

Ouch!!! -15% !!!

http://today.reuters.com/investing/F...px?sym=th!seti

stevem · #7 19-12-2006, 15:12

Hey Kev, how will this affect me when I sell my house next month. Does this make the transfer from THB to AUD bettera or worsera, or even hardera.

Coolhand · #8 19-12-2006, 15:13

Quote:

Originally Posted by K2

"The Bank of Thailand on Monday ordered banks to lock up 30 per cent of any new foreign currency deposits above 20,000 dollars for a year in an effort to curb inflows of funds pushing up the local currency.

Well that's 30% of my holiday spending frozen for a year - just have to keep it in the hotel safe!

Bobby · #9 19-12-2006, 15:24

It will be interesting to see how the THB will react.

Sirgezza · #10 19-12-2006, 16:34

Quote:

Originally Posted by stevem

Hey Kev, how will this affect me when I sell my house next month. Does this make the transfer from THB to AUD bettera or worsera, or even hardera.

Worse I think Steve. If the baht falls, you will get less Ozzie dollars for your baht.

If you are selling to a Thai, then the property sale should be unaffected, but you may find the Thai wil have less competition in purchasing properties, if farangs reduce the number of purchases.

Edit: Just checked the rate on XE and the £ has not moved since last night - maybe you will be okay.

stevem · #11 19-12-2006, 16:39

Quote:

Originally Posted by gez

Worse I think Steve. If the baht falls, you will get less Ozzie dollars for your baht.

If you are selling to a Thai, then the property sale should be unaffected, but you may find the Thai wil have less competition in purchasing properties, if farangs reduce the number of purchases.

Edit: Just checked the rate on XE and the £ has not moved since last night - maybe you will be okay.

Thanks not what I really wanted to hear I guess, and a Thai is buying the property

Bushdoctor · #12 19-12-2006, 18:36

Looks like THB went down 2% so far. Apparently thie new rule doesn't affect trade or foriegn direct investment. This will be interesting to watch.

K2 · #13 19-12-2006, 18:47

Stevem - it does not affect your house sale or repatriating the proceeds of that sale.

At present (midday London) THB has only weakened by ~1.8% from its peak (USD weaker) - now trading 35.85.

The BoT want a weaker THB and they mean business - this is a drastic step to take - and now the funds will be looking for the exit door. I 'hear' from Bangkok they look for 38 as the level they desire.

800 billion Baht ($22 billion) wiped out of stock values as the SET closes out down 14.8%.

Financial community have suddenly woken up to risk - som num na! (It was almost surreal the blaze reaction to the coup).

K2 · #14 19-12-2006, 18:49

Quote:

Originally Posted by Bushdoctor

Looks like THB went down 2% so far. Apparently thie new rule doesn't affect trade or foriegn direct investment. This will be interesting to watch.

Correct - BoT clarified that this ruling only appleis to funds brought into Thailand for investment purposes - and does not affect legitimate trade.

faultytowers · #15 19-12-2006, 19:08

There is an article in the Nation about this.

http://www.phuket-info.com/forums/ne...tml#post266479

K2 · #16 19-12-2006, 19:45

Nicke's Nation auto post is highlighting some major stories on this developing financial story.

However - this story just breaking indicated there is confusion at some bank level ...

.... expat ...... transferred 150,000 euro from a bank in Hong Kong to Kasikornbank Tuesday, without knowing of the measure.

He was shocked to know that 30 per cent of his money would be parked with Kasikornbank once he converted the foreign currency into Thai baht.

Story here:

http://www.nationmultimedia.com/brea...ewsid=30021988

LivinLOS · #17 19-12-2006, 19:57

One more thing that makes this place look like a banana republic..

K2 · #18 19-12-2006, 20:08

Thing that surprises me is the amount of money being piled into Thailand despite the coup - Thaksin probe etc etc ...

The Bank of Thailand text is here:

Untitled Document

There is talk on Reuters now of some parts of these capital controls being lifted ... this is really nonsense.

Bushdoctor · #19 20-12-2006, 01:35

Hmm....so what would happen if the guy had converted an amount over 20K somewhere else first, and then went to a Thai bank and just made a normal cash baht deposit?

urtheman · #20 20-12-2006, 02:12

Here's the other side of the coin.

All the big boys want to see a weak baht (39-41) to the dollar. These are the big companies who export (duh)

There has been some recent investment in baht that has made it strong and now Thailand is not as competitive to other guys in the region.

Look at what they export and that tells you who is running the central bank.

My opinion is if your in Thailand for the long haul leaving the money over 1 year is not a problem, but if you are a quick in and out guy they don't want you.

Play by these very differant rules and there is still something there (you won't see it from this website, but it's there.)

If you know who's making the rules and the companies they are in (if they are good ones get involved)

Cheers!

Cheers!

urtheman · #21 20-12-2006, 02:15

Just a quick side note
I can't even set up a proxy server so anything I say besides how to cook the perfect burger should be taken with a shot of tequila

kiro · #22 20-12-2006, 02:22

By the sounds of it this just got better and the BoT lifted the restriction for equity investments. This as a result of today's rather big correction in the local equity market.

Yesterday's moves left pundits and investors puzzled, I doubt that today's swift reversal will reinforce confidence in the current policy makers.

Shortdated interest rates traded as high as 300pct at some point today. One would think that after all these shenanigans the currency would correct further (obviously this was the intention but 15pct correction in the equity markets sounds rather high cost to achieve this).

K2 · #23 20-12-2006, 10:29

SET rebounds 8.%5 (10.30am 20/12) and THB stregthens to 35.60 (fron NY 35.85). Offshore O/N THB falls to 7.9%.

Looks like normal service resumed after the BoT are forced to back peddle. I cant say I'm filled with confidence however.

LivinLOS · #24 20-12-2006, 10:51

WOW the money that could have been made if you knew those 2 press releases in advance !!!