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The yuan may substitute for the US dollar in intra-Asian trade in the future when bond markets in the region are well developed, said Kiat Sithi-amorn, president of the Thai Trade Representative Office.
The presence of the Industrial and Commercial Bank of China (ICBC) in Thailand will promote the role of the Chinese currency in the region, he told The Nation ahead of the Group of 20 and Asia-Pacific Economic Cooperation summits.

Kiat said Thailand supported efforts of G-20 and Apec leaders to conclude multilateral free-trade agreements under the World Trade Organisation by next year. He also said the government would pursue an FTA with the European Union.

Regarding the so-called currency wars, where the United States and China are engaging in competitive cur?rency deval?uation, Kiat said this must not lead to trade pro?tectionism.

He said a greater role for the yuan in Asia is expected to ben?efit Thailand and the region.

To expand the role of the yuan, the region has to develop bond markets, he suggested. He noted that investors held US dollars because they could reinvest them in the US bond market, in particularly buying US government bonds.

The weakening of the US economy has weakened the dol?lar and Thai exporters risk high volatility of the baht exchange rate. Meanwhile, the fast growth of the Chinese econ?omy along with the emerging economic power of the East has made the yuan more attractive.

Kiart expects ICBC to play a greater role in promoting yuan transactions, as it is world’s largest bank in term of assets and the number of deposit accounts.

ICBC recently bought ACL Bank and established ICBC (Thailand), and it will offer yuan loans to Thai exporters. ICBC also has branches in Singapore, Malaysia, Indonesia and Vietnam.

EU allegation against THAI dropped

Posted by arnon_k On November - 11 - 2010 ADD COMMENTS

The European Commission (EC) has concluded its investigation and dropped charges against Thai Airways International (THAI) for alleged involvement in air freight collusion.
THAI Vice President of Legal and Compliance Department, Niruj Maneepun, said the company remains confident that as the national carrier of the Kingdom of Thailand, THAI has followed international rules and regulations including those in the EU.

Since 2008 THAI has set aside a contingency fund of Bt4.29 billion for cases pertaining to competition laws of the different regions.

Tisco Securities said in its research that the reserves could be converted to net profit in the fourth quarter. If so, the airline’s net profit this year could hit a new record at Bt23.9 billion, from the previous estimate of Bt19.6 billion.

B3bn poured into Thai-Chinese zone

Posted by arnon_k On November - 11 - 2010 ADD COMMENTS

Thai and Chinese investors plan to invest a combined 3 billion baht to further develop the Thai-Chinese Rayong Industrial Zone and set up new projects there so that the facility can serve as a production base for expansion into Asean.

The investors yesterday signed two memoranda of understanding and two investment agreements to utilise around 500 rai in the industrial estate in Rayong province.

Kiat Sittheeamorn, president of the Thailand Trade Representative (TTR) Office, said the Thai-Chinese Rayong Industrial Zone would be further developed and operated by Amata Group and Holley Group of China. It will be located in the Amata Industrial Estate.

Established in 1970, Holley Group is a multi-industry corporation under Holley Worldwide Holdings. Its core business is pharmaceuticals but the group also has presence in several industries such power metering instruments and power automation systems, wireless and wide-band telecommunication, electronic materials, real estate, agriculture, petrochemicals and mining.

Holley employs a 10,000-strong workforce worldwide, with manufacturing bases and branches in the United States, France, Russia, Argentina, India, Thailand and the Philippines.

The second project is an investment by Futong Group in the Thai-Chinese Rayong Industrial Zone. The company plans to invest US$50 million to manufacture fibre-optic cables for the telecommunication industry.

The third project involves a US$40-million investment by Hebei Lizhong Wheel Group to set up a tyre factory in the industrial zone.

The fourth agreement is between Huawei Technologies of China and United Information Highway of Thailand for a national broadband expansion project.

Mr Kiat said the moves showed China was interested in using Thailand as a base for investment for exports to Asean ahead of planned integration in 2015.

Cumulative bilateral investments of the two countries were US$1.04 billion over the past six years.

Amata shares closed yesterday on the Stock Exchange of Thailand at 15.00 baht, down 40 satang, in total trade of 154.89 million baht.

Capital controls urged

Posted by arnon_k On November - 11 - 2010 ADD COMMENTS

Thai authorities may have to implement stronger measures to control the heavy inflows into the country’s capital markets and rein in the baht’s appreciation in line with action by other countries, says an economist with a foreign-based bank.

The economist predicted the baht would strengthen to 29 to the US dollar by year-end. As a result, the government should impose new capital controls during the final two months of 2010 to ease the currency strains.

“New capital controls should be started, using soft measures first and increasing in degree, in accordance with the current situation here and in other regional countries,” said the economist.

Taiwan’s central bank recently announced capital control measures for that country’s bond market, followed by the South Korean government hinting it may revive a 14% tax on domestic Treasury and central bank bonds held by foreigners as early as next January.

The impact of the weakening dollar has been heavy, particularly after the US Federal Reserve announced a US$600-billion second quantitative easing to increase market liquidity.

“Thailand’s existing measures will not be enough to control foreign capital inflows and the stronger baht. Additional measures will be necessary,” said the economist, who asked not to be named.

“I think all central banks in the region including Thailand’s have prepared measures for capital controls, because all regional countries have been heavily affected by the dollar depreciation and foreign capital fund inflows. The Bank of Thailand may wait to see the market situation here and in other countries before announcing any measures.

“In my opinion, the government should implement a capital gains tax for investment in the SET, as well as a 100% tax on foreign exchange gains. Such measures would help to ease the stronger baht efficiently.”But Robert Zoellick, president of the World Bank, disagreed, saying fears of a surge in capital flows to emerging markets have been overblown, with some concerns overstated.

“Even if you didn’t have the quantitative easing, as long as you have differential growth rates, you are going to see capital flow to these emerging markets,” Bloomberg quoted Mr Zoellick as saying.

Asian currencies fell yesterday, led by the Singaporean dollar and the baht on market concerns that policymakers will follow China and Taiwan in imposing capital controls.

Taiwan yesterday announced it would restrict foreign investment in government bonds and money-market products, while China said it will force banks to hold more foreign exchange.

Separately, Ariya Tiranaprakij, executive vice-president of the Thai Bond Market Association, said bonds have been affected by the Thai government’s revival of a 15% capital gains tax on foreigners’ bond investments.

“The trading volume in bonds has declined since the government’s announcement. Investors are also concerned the central bank may implement new measures for capital controls, leading to sluggish activity in the market,” she said.

Currently, trading volume is about 4 billion baht a day, down from 10 billion a day during the first two weeks of last month. However, the capital control measures for Taiwan’s bond market have not yet significantly affected Thailand’s market.

Thiti Tantikulanan, the head of capital markets at Kasikornbank, said Taiwan’s soft capital control measures for its bond market would not have a significant impact on Thailand’s.

Tha baht has strengthened mainly on the dollar depreciation. Foreign capital inflows are expected to continue into the stock market and commodities.

Thai exporters say a further rise in the baht would weaken some suppliers in the industrial supply chain, resulting in damage to the industrial structure.

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