Capital Outflow Worries Thai Baht For 6 Years

As the Central Bank of Thailand relaxed the restrictions on domestic investors entering the overseas market, the market feared that the capital flight would deteriorate further, causing the Thai baht to fall and refresh its lowest level in six years.

Morgan Stanley said this month that after the devaluation of the yuan, ten emerging economies faced greater risk of devaluation, including the Thai baht.

Shigehisa Shiroki believes that the baht will further degrade to 36 in the next few months.

Pongpen Ruengvirayut, deputy governor of Thailand's central bank, said on Friday that Thailand's central bank will allow wealthy individuals and enterprises to invest directly in overseas markets, including overseas stock markets, bond markets, mutual funds and other financial assets.

The amount of overseas direct investment is limited to $5 million per year.

However, the Thailand central bank's plan has increased the market's concern about the increase in the country's capital outflow.

The baht again suffered a sell-off.

During the afternoon trading in Bangkok, the Thai baht dropped 0.6% to the US dollar, erasing all gains this week to 35.858.

The Thai baht hit 35.94 earlier, the weakest level since March 2009.

Shigehisa Shiroki, general manager of Mizuho bank's Bangkok Treasury Department, mentioned to Bloomberg that Thailand's central bank is more willing to let domestic funds flow through the territory of its own citizens rather than allow them to do so.

People easily pfer funds.

The orderly decline of the number of currencies is acceptable to the Central Bank of Thailand.

Since this year,

The central bank cut interest rates twice to suppress the Thai baht exchange rate, thereby stimulating exports.

In the wake of the massive withdrawal of international capital from emerging markets, the devaluation of the Thai baht is also one of the stimulant factors for the acceleration of capital leaving Thailand.

The Thailand stock exchange data show that international investors withdrew from Thailand this month.

The scale of outflow amounted to US $1 billion 220 million, the largest monthly outflow since 2013.

In addition, overseas investors sold Thailand bonds worth 451 million US dollars.

The Thai baht has been under pressure of depreciation recently.

Early last week, a major explosion occurred in the main shopping district of Bangkok, capital of Thailand, on Monday night, killing 27 people.

The Thai baht refreshed its six year low by 35.52.

Since this year, the Thai baht has fallen by 8.2%.

Another reason for the depreciation of the Thai baht lies in the fact that the interest rate trading in emerging markets is now heading for "death."

As the Fed raises interest rates, developing interest trading in emerging markets is becoming increasingly unattractive.

The market expects that the Fed's earliest interest rate increase may be September.