BoT: Fund inflow not speculation

BoT: Fund inflow not speculation

Offshore capital flowing into Thailand’s financial market is not considered speculative but rather as investors’ increased incentives in their risk-appetite investments, says a senior Bank of Thailand official.

Mathee Supapongse, deputy governor overseeing monetary stability, said investors’ viewpoints were leaning towards a greater risk-on mode due to the possible delay in the US Federal Reserve’s first interest rate rise since the subprime crisis.

Other emerging markets in the region have also experienced greater fund inflows, he said.

"It [capital inflow] is normal in the [investment] return market, and we should not view this as abnormal or alarming, given that the exchange [of fund flows] is not too substantial," Mr Mathee said.

"If we restrict this [capital inflow], then there will not be two-way flows [of financial capital]."

On the contrary, financial capital would record an outflow from Thailand’s financial market if the US economic data continues to improve or Fed officials further signal their move to raise the fund rate in December, he said.

Offshore funds flowing into the local bond market amounted to 52.2 billion baht in the first 12 days of this month compared with 104 billion yanked out during the nine months to September, the Thai Bond Market Association (TBMA) said.

Of the total inflow from Oct 1-12, a total of 41.2 billion baht was spotted in short-term bonds, classified as debt instruments with a tenor of one year or less, and the remaining 11 billion in longer maturity bonds. In comparison, foreign investors cashed out 68.9 billion baht from long-term bonds and another 35.5 billion from short-term ones in the first nine months.

TBMA president Tada Phutthitada earlier said he expected foreign funds would still park in short-term bonds until the timing of the Fed rate rise became clearer.

Foreign investors have bought 7 billion baht more than they sold in the Thai stock market this month.

Foreign fund inflows appreciated the baht to trade just above 35 to the dollar at one point this month from beyond 36 last month.

Amonthep Chawla, head of research at CIMB Thai Bank, said the baht still recorded stability, and recent fund flows into the domestic financial market were attributed mainly to investors' eased concerns over the Fed rate increase.

"It could be short-term speculation, but it is rather regarded as [investors’] search for return on risk assets," he said.

Mr Amonthep said other emerging markets had also registered capital inflows on the back of a possible delay in the Fed’s rate rise.

Capital inflow into Thailand’s financial market was, however, considered a short-term phenomenon, as the Fed will eventually begin to normalise its fund rate, he said.

The baht’s outlook for year-end could be similar to its value at the end of 2013, when the Fed started to taper its quantitative-easing programme, Mr Amonthep added.

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