Kittiratt: Fed move will help Thai economy

Finance Minister Kittiratt Na-Ranong said the third round of quantitative easing (QE3) by the US Federal Reserve is a good thing for Thailand, especially its open-ended nature.

Published: 15/09/2012 at 12:00 AM

"Don't be alarmed by the open-ended nature of it. Having no limit is a good thing because if the limit is set too low or too high, it may worry people on either sides," he said.

He also brushed aside concerns that the measure will negatively impact Thai exports by causing the baht to appreciate.

"It's not that the Thai currency will appreciate [as a result of QE3], but rather the US dollar will weaken against other currencies. So with competitors, this will hardly have any effect," he said.

SET soars: Market loves QE3

He added however that in the long term, the US has to implement measures to deal with its fiscal cliff issue and reduce its budget deficit, while European Union has its own problems to solve.

Despite the minister's assurances, local financial markets are carefully monitoring foreign capital inflows after the Fed unveiled new plans to inject money into the economy, which could flood economies with excessive liquidity.

US Federal Reserve chairman Ben Bernanke announced the agency would buy US$40 billion (1.23 trillion baht) worth of mortgage-backed securities a month for an unspecific period, pending a recovery in the jobs market.

The baht appreciated by 0.8% to 30.72/79 a dollar yesterday from Thursday with the greenback weakening as investors expected increased liquidity.

But local analysts remained wary as they assess the impacts of the measure.

Teerana Bhongmakapat, dean of Chulalongkorn University's faculty of economics, said QE3 would likely have a small impact on Asian economies, which could be at risk of a slowdown due to a decline in external demand.

He said the new liquidity injected by the Fed could head to the commodities markets, particularly gold, silver and oil.

Dr Teerana said the market might overreact to the "open-ended" feature of the operation.

"For investors, the connotation of [open-ended] is excessive liquidity. But the Fed might just be referring to uncertainty in the world economy in the next year," Dr Teerana said, adding it was also unclear when QE3 would take effect.

The Fed may have left the QE3 timeframe unspecified because it wants to extend the previous liquidity injection, worth a total of $650 billion, which is about to end next month, as part of QE3.

Dr Teerana said the government and the Bank of Thailand should allow the baht to appreciate if there are foreign capital inflows rather than buying the dollar in the market or cutting interest rates to keep the baht weak.

"It is a matter of whether the government should think long or short term. The central bank has perhaps accumulated too many dollars in foreign reserves because of foreign exchange intervention in the past several years. It does not have much room to continue doing so," Dr Teerana said.

Singhachai Boonyayotin, the Bank of Thailand's senior director for the Financial Markets Department, said local assets have adjusted in anticipation of the Fed's move during the past few weeks.

The baht's appreciation yesterday was in an acceptable range and in line with the movement of currencies in the region, so the central bank did not buy dollars on the market, he said.

"The baht's appreciation could represent the market's knee-jerk reaction. We will need to monitor the trend over the next few weeks before we decide if we should act," Mr Singhachai said.

Ian Gisbourne, an analyst with Phatra Securities, said the Fed's announcement of QE3 has not changed his targets for the SET Index at 1,350 at the end of this year and next.

"There has been huge foreign investment in local stocks recently because of both economic fundamentals and anticipation of QE3," he said.

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Discussion 1 : 18/09/2012 at 02:12 AM: Khun Gordlimey #15, you are exactly correct. This is the end result of Liberalism in the USA, namely, a big nanny-state- European style big Govt, and overregulation utopianism, prohibiting manufacturing in the US. So, when making products is increasingly prohibitive, what is left is making money, and that's how the dollar/debt system, as you pointed out, was created. So, what is the solution? The solution is to return the country to be under the US Constitution, prior to the arrival of Liberalism from Europe. Until, limited Govt & individual Liberty, based on private property right, is restored, the US will continue to go the same direction of the two oldest Democracies in the world, the bankrupting UK and bankrupted Greece.
Discussion 2 : 17/09/2012 at 05:02 PM: spiceman: You obviously know more about American politics than me. I honestly don't know if they class Obama (DEMS) as liberals, but i think personally, it doesn't matter who is in power, the dollar/debt system of the fed reserve is doomed to fail. The justification i give for " largest creditor on earth to become the largest debtor on earth within a few decades"? is the simple fact that every dollar printed is debt. This debt is held by private banks (FED) not the U.S.A. government. these private banks have a monopoly to create your money,(debt) your dollar, the worlds business currency. I agree with you that America " keep spending more and more of the money you don't have" and this is the thing. Spiceman, if you collect every dollar in the world today (462 billion) you could never repay the debt owed. so the U.S.A. and the world keep borrowing. I know you understand the consequences of this.
Discussion 3 : 16/09/2012 at 07:27 PM: Khun Gordlimey #13, how's about living within our means? Socialist Liberals in both the US and the EU keep expanding the Govt sector to the point that there is not enough room left for the private sector, redistributing income all the way to the ground from the productive citizens to the freeloaders. Can you give me any justification of making once the largest creditor on earth to become the largest debtor on earth within a few decades? Can you keep spending more and more of the money you don't have? And yes, if Obama loses, the US will have no choices but to return to the old Gold Reserve System, in order to prevent the Liberals from ruining once a magnificent country on earth ever again. But if Obama pulls it off, may God have mercy on the brain-dead American voters, and I'll see you in Thailand soon with a few of my American millionaire buddies.
Discussion 4 : 16/09/2012 at 04:02 PM: Spiceman d12: I take it you mean; “Commerce with all nations, alliance with none, should be our motto” -Thomas Jefferson If so, Let us hope that the people wake up, and demand the end to the dollar/debt, petro/dollar as a means to dominate the people of the world and their resources, to create profits for the Elite. (i don't agree that you can blame the "Socialist liberals" for the ill's of the U.S.A. after all they never started the FED reserve). did they?
Discussion 5 : 16/09/2012 at 02:11 AM: Khun Gordlimay #11, as Obama and the US Economy are sinking, it looks more like the end of the road for Socialism (populism) in the US and a return to Free Market system as written in the US Constitution, namely, limited Govt and individual liberty. The American people, especially, those who are Socialist liberals, have to learn their lesson the hard way, that no one is immune from the curse of Socialism, either as individual or nation. The Soviet Union, along with its Eastern Blog countries, and China have learned their lesson that Socialism led to economic ruin and bankruptcy. Hope Thailand will learn the same painful lesson too, before it is too late.
Discussion 6 : 15/09/2012 at 04:28 PM: D4: D9: spiceman; Well said. But do you not agree, that this is more than "the US Economy remains in crisis". This looks like the end of the road for the FEDs dollar/ debt game. Paper money will be useless soon, when hyper inflation takes a hold. What will happen then? Look to your history books and read today's headlines in the papers.
Discussion 7 : 15/09/2012 at 02:54 PM: Finance Minister Kittiratt Na-Ranong "I told a lie to make people reach the target", "I did not lie". Must have learn a lot from Mr. T , flip flopping back and forth.
Discussion 8 : 15/09/2012 at 02:07 PM: Khun 3Rivers #8, each time the US prints money out of thin air, oil price will rise and so will food price, which triggered the recent Arab Spring to begin with. Now, Thailand's dollars reserve will become less and less in value as long as the US keeps printing it out of thin air. So, in the short run, Thai Baht will rise as the dollar falls which will help American import but hurt Thai export. In the long run, however, no one will be better off as long as the US Economy remains in crisis.
Discussion 9 : 15/09/2012 at 11:21 AM: This is amazing. To hear a politican, let alone the PT Deputy Prime Minister actually say stuff that makes sense is almost as wonderful as yesterday's Merry Christmas. As for the average everyday folk, this will mean prices for the things that are basic and very important, the two biggest being of course steel and oil, will be stable or actually fall somewhat again as long as the BOT isn't influenced to put an even bigger hole in it's balance sheet. Thai consumers will continue to benefit. As Americans we will lose out on benefits locked in US dollars, such as Social Security, but it won't be a surprise. We have nothing to complain about even if we go into the teens against the Bhat, which is quite possible another ten years out.
Discussion 10 : 15/09/2012 at 11:19 AM: Is this another white lie?
Discussion 11 : 15/09/2012 at 10:49 AM: The price of gold rising 400baht is not a reaction to the stimulus package. Its a reaction to the current global economic meltdown. A safe harbour in the storm.
Discussion 12 : 15/09/2012 at 10:08 AM: US Fed has decided to print 5% more money every year for the foreseeable future. This means thet the value of the currency now in circulation will go down by 5% per year for the foreseeable future. Of course the big money already anticipated this move and has been moving to Gold, silver, commodities and other currencies and equities for a month already. The US government can not make the economy grow, so they will try to inflate their way out of trouble...I believe it will end in disaster. The poor will not be in any position to do anything but pay more for everything, the rich will hedge on inflation proof investments and stay the same, and the government will decide it needs to borrow even more money to give to the poor and they will go into even deeper debt to do so until they reach the bottom like Greece and can no longer borrow.
Discussion 13 : 15/09/2012 at 09:11 AM: Welcome to the Banana Republic of America, where creating money out of thin air is now a way of life!
Discussion 14 : 15/09/2012 at 08:23 AM: So another to join the conga line espousing the benefits of money printing. Devaluing a currency and reducing the value of retirees savings is now good economic policy? Perhaps we should think as to why the Europeans, Chinese and US by one means or another are all printing money, is is because their economies are strong and the outlook positive or because they are in dire trouble with minimal GDP and increasing unemployment and debt and are looking for any way they can to cover that up? Thailand perhaps should consider that there is an economic storm coming, perhaps a little getting the house in order now will reduce the pain later in an export driven economy when it does come. If Thailand later also prints then I would expect some very busy gold shops as the Thais will quickly do the maths on that.
Discussion 15 : 15/09/2012 at 08:21 AM: Qe3 will help the American Economy about as much as CPR would help a week old corpse. America has outsourced and exported most decent paying manufacturing jobs and where factories that paid middle class wages once stood are warehouses full of imported Chinese goods, there is very little real economy left. It will succeed in pushing down the Dollar which hurts the few of us who left the madness there to live elsewhere.
Discussion 16 : 15/09/2012 at 08:15 AM: "Finance Minister Kittiratt Na-Ranong said", sorry sir, you will be taken with a grain of salt whatever you say from now on.

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