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17 Feb 2022

Econ Digest

Thai Baht hits a 7-month high on increased foreign capital inflows


        Foreign investors have steadily resumed their investment in the Thai stock and bond markets since the beginning of 2022. Within one and a half months during 2021, foreign investors reverted their net selling position of THB48,577 million in Thai stocks to a net buying position of THB64,580 million. They also increased their holding of Thai bonds by THB127,778 million, making the total holding of Thai bonds by foreign investors to reach THB1.15 trillion, accounting for approximately 7.67% of the total outstanding value of the Thai bond market, representing a record high in three years.

        Foreign capital inflows in the Thai stock and bond markets have become an important factor in causing a gradual appreciation of the Baht this year (after depreciating 10.4% in 2021) as the Thai economy is projected to record higher growth than the previous year. On February 17, 2022, the Baht hit its highest level in 7 months at THB32.20/USD or appreciated by 3.8%YTD, becoming Asia’s best-performing currency. Additionally, the Baht’s appreciation has been supported by the US dollar sell-offs, which are in line with increased gold exports amid rising global gold prices.

        The fact that foreign investors have resumed their investment in Thailand is due to their expectations to get greater returns on investment of financial assets and benefits from changes in forex rates (if Baht becomes stronger). Therefore, close attention must be paid to economic conditions in Thailand and other conditions that will continue to induce foreign investment here, particularly when the Fed has begun to raise their policy rates and give signals to reduce the size of its balance sheet over the coming months.  

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Econ Digest