Investors tally record outflows in Q4

Investors tally record outflows in Q4

Thai investors posted record net portfolio outflows in the fourth quarter last year after the Bank of Thailand relaxed offshore investment regulations as part of its foreign exchange (forex) ecosystem policy to manage the baht.

In the fourth quarter of 2020, net portfolio outflows for Thai investors -- both individuals and institutional -- increased to US$17.8 billion (570 billion baht), compared with an average of $3.1 billion per year between 2010-2019, said Chayawadee Chai-Anant, the central bank's senior director for the economic and policy department.

Of the total, $3.6 billion was generated by institutional investors and $14.2 billion by retail.

The number of individual investors in offshore markets continued to increase from 8,971 in November 2019 to 15,660 in November 2020, then doubled to 34,897 in May 2021.

"The outflow was in line with better opportunities in offshore markets as the global economy recovered, as well as the central bank relaxation on offshore investments," she said.

Moreover, the home-bias index of Thai investments declined from an average level from 95% between 2015-2019 to 93% in 2021. Though the ratio is still high compared with other countries in the region, the central bank expects the Thai home-bias investment index to gradually decrease under the central bank's forex ecosystem policy and greater opportunities for offshore investment.

From 2015 to 2019, the home-bias investment index was 89% in Malaysia, 88% in South Korea, 36% in Singapore, and 32% in Hong Kong, according to the central bank's data.

The Bank of Thailand also eased other regulations over the past five months under its forex ecosystem policy to manage the baht's movement and balance the country's forex structure over the long term.

Amended regulations for foreign currency deposits (FCD) is another instrument to manage the baht, which has caused FCD transaction volumes to rise significantly.

After the easing of FCD rules, the total FCD transaction volume was $141 billion from December 2020 to April 2021, compared with $102 billion from January to November 2020.

The number of new FCD accounts increased by 1,553 between December 2020 and April 2021, representing 48% of total accounts. Moreover, 60% of new FCD accounts were retail.

In addition, the central bank implemented a bond investor registration programme requiring foreign bond investors to register with the regulator before investing in the Thai bond market.

Registration is available until December this year and the new regulation takes effect on Jan 4, 2022.

The central bank also relaxed forex regulations under the non-resident qualified company scheme, with foreign companies involved in forex no longer required to provide proof for each transaction.

This year roughly 20 companies have joined the project and accounted for a transaction volume of $3 billion. More companies are in the pipeline to participate in the project, said Ms Chayawadee.

She said the central bank plans to relax and implement additional forex regulatory frameworks covering inbound and outbound forex transactions, forex hedging, and forex documentary processes.

The measures are expected to be implemented in the fourth quarter this year.

Ms Chayawadee said the baht has been weakening in line with regional currencies due to external factors.

For a period, the baht did depreciate more than regional currencies because of Thailand's dependence on tourism, which has been limited by the pandemic, she said.

The local currency weakened to 31.92 baht against the dollar yesterday, the lowest mark in 13 months.

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