Article source: BangkokPost.com

The Bank of Thailand sees no risks associated with foreign exchange or capital flows in allowing investors to pay for Thai shares in major foreign currencies but says further study is needed on the amount permitted for such transactions.

Central bank spokesman Chirathep Senivongs Na Ayudhya said a multiple-currency stock payment service would not pose any foreign exchange or capital flow risk, as the baht would not be affected by how traders made their transactions.

“The concern is the appropriate amount for these transactions, which demands further study,” he said.

The Stock Exchange of Thailand (SET), the Securities and Exchange Commission and the Finance Ministry have not approached the central bank for discussions on this issue, Mr Chirathep said.

The SET recently announced it would propose to the Finance Ministry that investors be allowed to pay for Thai shares in major currencies in the future, particularly US dollars. The move is aimed at beefing up the SET’s competitiveness and pushing the local bourse to be a regional leader, as it could help to sway foreign investors by helping to mitigate their investment risks from foreign exchange fluctuations.

Other stock exchanges in Southeast Asia such as Singapore and Malaysia have allowed multiple currency payments for investors for several years.

Meanwhile, the European Central Bank (ECB) and the Bank of Japan (BoJ) are expected to continue their relaxed monetary policies and could resort to unconventional measures due to fragile economic conditions and low inflation in both the euro zone and Japan, said Mr Chirathep.

While monetary policies of the major economies could cause volatility in Asian financial markets, sound economic fundamentals in emerging Asian markets should help to mitigate the impact compared with other regions, Mr Chirathep said.

He said euro-zone economic conditions, future economic outlook and inflation targets could prompt a looser ECB monetary policy. The ECB may need to pump in more money by purchasing more assets to meet its balance sheet expansion target if the market response or consequences of its monetary policy such as the amount of second-round borrowing for longer-term refinancing operations next month are lower than expected, said Mr Chirathep.

He said the BoJ’s quantitative and qualitative monetary easing would reduce risks on subdued economic activities stemming from a hike in Japan’s consumption tax, but whether the government would continue to raise its consumption tax next year to improve its fiscal fundamentals bore monitoring.

Gary Beal