April 5, 2013 / 7:06 AM / 7 years ago

Baht up as BOJ policy seen spurring more inflows to Thailand

* Thailand seen as a top destination of yen carry trades

* Baht hits highest against yen in nearly 5 years

* Some see pace of baht appreciation slowing down

By Jongwoo Cheon and Viparat Jantraprap

SINGAPORE/BANGKOK, April 5 (Reuters) - The Thai baht rose on Friday, helped by demand from offshore funds as the country’s assets are expected to be popular targets for investors borrowing cheap yen following the Bank of Japan’s surprisingly bold monetary policy easing.

The baht rose 0.3 percent to 29.29 per dollar as of 0653 GMT. The Thai currency hit 30.096 to the yen, its strongest since May 2008.

“USD/THB is Asia’s lone one-way depreciation bet,” said Tim Condon, head of Asian economic research at ING in a note early Friday. “We reiterate our bullishness on all THB-denominated assets, starting with real estate, equities, the THB and fixed income.”

On Thursday, new BOJ Governor Haruhiko Kuroda committed the central bank to open-ended asset buying and said the monetary base would nearly double to 270 trillion yen ($2.80 trillion) by the end of 2014, in a bid to end two decades of stagnation through shock therapy.

Analysts say the baht, emerging Asia’s strongest currency this year, should appreciate more because of “carry trades” in which investors borrow cheap yen to put elsewhere to seek higher yields - which they believe Thai assets will provide.

Saktiandi Supaat, head of FX research for Maybank in Singapore, said the baht will get more support from Japanese investment flows “given excess liquidity globally now with the new injection from Japan.”


The bold easing may make it less costly for Japanese manufacturers to borrow at home for increase Thai investments. Automakers have already made plans to boost capacity in Thailand.

Strong capital inflows, especially for Thai bonds, have helped the baht gain about 4.5 percent against the dollar this year, according to Thomson Reuters data. Foreign direct investment and inflows for infrastructure projects also boosted the baht.

“Bond valuations are attractive anyway, given the steep curve and receding supply concerns. Recently, Thai government bonds have attracted increasing foreign investment, as they are a clearer choice within ASEAN,” Barclays said in a note.

As of March 29, foreign investors had bought a net 282 billion baht ($9.60 billion) in Thai bonds with 199 billion baht in short term debts, according to the Thai Bond Market Association.

The Thai economy grew 6.4 percent in 2012 and the National Economic and Social Development Board forecasts 4.5 to 5.5 percent growth this year.

Foreign investors are buying up Thai funds at the fastest pace in more than five years, lured by returns from an ascendant currency and extending a share-price rally in what was Southeast Asia’s best performing market last year.

Reflecting optimism, bullish bets on the Thai baht rose to their highest in a year, a Reuters poll last week.

In March, the baht hit 29.07 to the dollar, its strongest since 1997.


Still, some currency traders said the baht is unlikely to appreciate quickly in coming months after its January-March gain of 4.5 percent, the largest since the third quarter of 2010, according to Thomson Reuters data.

The baht appreciated too far ahead of other Southeast Asian currencies and it “may not be poised to be the best gainer in the near future,” said a Bangkok bank trader.

Investors are also concerned over possible measures by the authorities to stem the baht’s strength. The finance minister has repeatedly asked for interest rates to be lowered to discourage inflows.

In the stock market, the main index hit a 19-year high in March.

As of Thursday, foreign investors have sold a net 1.2 billion baht in shares this year, according to Thomson Reuters data.

The BOJ’s dramatic easing should result in inflows into Thai stocks “but we still expect weak performance in the near term partly due to tighter rules on margin loans,” said Chaiyaporn Nompitakcharoen, head of research at Bangkok broker Bualuang Securities.

Brokers have tightened control of credit balance margin loans to limit speculative trading. The Thai stock exchange is to raise minimum deposits for cash accounts used to trade in certain stocks to 20 percent of trading value from 15 percent in a bid to curb volatility.

On Friday, Thai stocks were down 1.9 percent.

$1 = 96.3700 Japanese yen $1 = 29.29 Thai baht Editing by Richard Borsuk

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