27-6-2023 (BANGKOK) The Bank of Thailand (BoT) has announced its decision to double the investment limit for Thai retail investors in foreign securities as part of an effort to encourage capital outflows and address the volatility of the baht. In a statement released on Tuesday, the central bank highlighted that relaxed foreign-exchange regulations for both domestic companies and individuals would assist in bolstering their risk management capabilities, considering the baht’s expected volatility due to various external factors.
Thai retail investors will now be allowed to invest up to $10 million in foreign securities, marking an increase from the previous limit of $5 million. This move aims to provide investors with greater flexibility and options in diversifying their portfolios.
Furthermore, the BoT intends to promote the use of local currency among domestic businesses and reduce their reliance on the US dollar by encouraging transactions in currencies such as the yuan, yen, ringgit, and rupiah. Alisara Mahasandana, the assistant governor for the financial markets operations group, informed reporters of this plan.
Additionally, the statement mentioned that certain foreign investors would be granted permission to hedge foreign-exchange risks with Thai financial institutions, thus providing them with more stability and protection in their investments.
To facilitate easier fund transfers, the central bank will raise the limit on grant money transfers without underlying transactions from $50,000 to $200,000, according to Ms. Alisara.
The BoT will also relax regulations for Thai subsidiaries of foreign companies, allowing them to engage in “notional pooling” by sending money to founders. Furthermore, the scope of activities for companies operating under the non-resident qualified company system will be expanded, enhancing their business operations.
The implementation of these new foreign-exchange rules is expected to take effect in the third quarter, as stated by Ms. Alisara.
These measures build upon the steps taken last year when forex regulations were eased to facilitate smoother capital movement and risk management during times of volatility.
The baht has experienced a decline of over 1.7% against the US dollar this year, with the current exchange rate hovering around 35.20 baht to the greenback. The BoT anticipates that the currency will continue to exhibit volatility and will closely monitor various external factors, including the monetary policies of major economies, inflation trends, and political uncertainties following the general election.
