The Bank of Thailand (BoT) today ruled out issuing measures to cope with the sliding baht and foreign capital outflows.
Pongpen Ruengvirayudh, BoT deputy governor for monetary stability, said the baht’s depreciation to Bt32 against the dollar, or down 4 per cent since early this year, as well as the capital outflows, were normal phenomena.
Foreign investors regularly compare profits from their investments in various ventures, while the US Federal Reserve has signalled a relaxation of its quantitative easing (QE) measures since May, resulting in foreign capital outflows by 15 per cent mostly from bonds and stocks, she said.
Thai shares plunged below 1,300 points yesterday, marking the longest losing streak since 1998, while the baht fell to a fresh three-year low on concerns that foreign outflows will accelerate.
She gave assurances that the BoT’s assets and monetary reserves at US$125 billion would be sufficient to cope with the capital outflows and that the outflows from Thailand were less severe compared to other newly-emerged markets.
The Philippine Stock Exchange slumped 3.96%, Jakarta tumbled 3.71%, the Bombay bourse fell 3.14%, and equity gauges in Kuwait, Saudi Arabia, Abu Dhabi and Turkey fell at least 2%, while European markets were also reeling as of press time. Foreign investors have pulled US$2.2 billion from equity markets in India, Indonesia, Thailand and the Philippines this month, Bloomberg said.
However, she urged the private sector to hedge risks despite the central bank’s attempt to prevent volatile currency movement.
Ms Pongpen expressed confidence in the strength of Thailand’s economic fundamentals given the current account surplus and believed that foreign investors would take into consideration the country’s economic expansion.
The government’s investment in infrastructure will reduce transportation costs and boost the kingdom’s competence, she said, contributing to economic expansion and investors’ confidence in the Thai economy.
The baht depreciation was beneficial to the BoT which suffered a Bt530.892 billion loss at the end of last year, she said, noting that the central bank was studying the possibility of using excess international reserves to invest in equities or a new opportunity fund.