BoT: No shift in yield-search behaviour
The magnitude of offshore investors’ search for yield in the Thai capital market remains unchanged as most of the fund flow has gone into the safe haven of government bonds, says the Bank of Thailand.
“We haven’t detected any irregularities in the search for yield behaviour since most of the capital inflow is still going into government bonds,” said Bank of Thailand governor Veerathai Santiprabhob.
The prolonged ultra-low and negative interest rates have triggered yield-searching among investors around the world.
The Bank of Thailand recently said policymakers have been monitoring “search for yield” behaviour amid a lowinterest environment, but risks from the issue remain limited.
He said the baht’s appreciation this year was largely attributed to the US dollar’s weakness against major currencies due to receding expectations of a Federal Reserve rate hike.
The baht’s value has strengthened by 4%, on par or even less than its regional peers such as the Malaysian ringgit and the Japanese yen, said Mr Veerathai.
He said the central bank has closely monitored the situation in the currency market and found that capital has occasionally flowed into the country at a fast pace, though that, in the central bank’s opinion, has not supported economic growth.
“In the past 1-2 weeks, the positive effects from the referendum result and better-than-expected economic growth in the second quarter could be reasons for some of the sudden short-term inflows,” said Mr Veerathai.
He said that it is very certain that the capital inflows and outflows will fluctuate more in the future.
Mr Veerathai said that as the currency market becomes more volatile, Thai exporters and businesses have become more adaptable to these fluctuations.
He added that the problem of Thailand’s shipments over the past few years have been caused more by supply side factors such as the kind of goods being exported and the economic situation in major export markets.