The Bank of Thailand (BOT) took the first step on Friday by reducing the amount of baht accounts held by foreign investors and called on financial institutions to provide reports on foreign investors holding debt securities issued in Thailand.

After BOT’s move, the Stock Exchange of Thailand closed at 1,731.59, down 8.86 points or 0.51 per cent from trading on Thursday. The baht also weakened by about 20 to 30 satang, depreciating to Bt30.90 from Bt30.60 to the US dollar.

“It is not clear whether the central bank’s action affected the stock market, as the impact on the value of the baht is very small,” said Pipat Luengnaruemitchai, assistant managing director at Phatra Securities Co. “I think this was just a warning shot and it implies that the central bank doesn’t really want to lower interest rates.”

If the US Federal Reserve cuts its policy rate later this month, then the baht is likely to move up against the dollar, Pipat said, adding that BOT’s last resort will be to cut the policy rate.

The fast-rising value of the baht has worried both exporters and policymakers as it could further impact Thai exports, which have already suffered from the global economic slowdown. Some economists have called on the central bank to lower the interest rate to prevent the baht from rising further as it could erode the competitiveness of Thai exports as goods from countries with weaker currencies will be cheaper in the global market.

Some analysts have forecast that the baht could edge up to Bt29 or Bt28 to the dollar by the end of this year should the Fed lower its interest rate twice this year.

Tada Phutthitada, president of the Thai Bond Market Association, said foreign investors sold bonds worth only Bt912 million, while their combined total holding is about Bt1 trillion. This is indicative of the fact that the central bank’s measure did not have much of an effect on the bond market. Yields of the 4.4-year bonds rose only 2 basis points, while that of the 9.4-year bond rose only 3 basis point. The year-to-date capital outflow from the bond market is only Bt1.8 billion, he added.

Details of the central bank’s measures are as follows:

1)    In order to prevent speculation in the Thai baht the BOT reduced the limit on the outstanding balance of Non-Resident Baht Account (NRBA) and Non-Resident Baht Account for Securities (NRBS) from Bt300 million to Bt200 million per non-resident with effect from July 22. For NRBA and/or NRBS with outstanding balances that are higher than Bt200 million at the end of the day, financial institutions will have to notify account holders to reduce their outstanding balance within the deadline.

NRBA holders who are non-financial corporates with underlying trade and investment in Thailand, and have opened accounts directly with Thai financial institutions, may submit requests to the BOT for a waiver on this outstanding balance limit, which will be considered on a case-by-case basis.

2)    Non-residents holdings debt securities in Thailand will be required to report the names of their end beneficiaries. This measure will help enhance the central bank’s monitoring of non-residents’ investment behaviours. This measure goes into effect as of July 2019.

“The central bank only warned foreign investors on Friday that it may take more action against them later,” Tada said.

A statement from the central bank on Friday said: “The BOT will continue to closely monitor the Thai baht’s movements as well as non-resident behaviours and stand ready to use additional measures if undesirable speculative behaviours persist.”

Kulit Sombatsiri, the ministry’s permanent secretary, said on Friday that the letter was in response to the Ombudsman’s suggestion that the ministry revise its Power Development Plan (PDP) for 2018-2037 by boosting the state’s contribution to at least 51 per cent.

He said once the response is ready it will be submitted for review by the new Energy Minister Sontirat Sontijirawong.

The letter explains that the Electricity Generating Authority of Thailand (Egat) exclusively owns the power lines across the country, indicating that the state has invested at least 50 per cent in the country’s electricity generation system.

If the Ombudsman still finds the explanation inadequate, the ministry might consider asking the Cabinet to see if the case should be submitted to the Constitution Court, he added.

The Ombudsman recently told the ministry that the 2018 PDP allowed private companies to share the role of producing electricity, which has resulted in reducing the state’s contribution to less than 50 per cent. It also said that this contravenes the second paragraph of the 2017 Constitution’s Article 56. The Ombudsman has asked the ministry to find a way of complying with the charter within 120 days.

Throw in supply concerns from the thorny geopolitical picture in the Persian Gulf and prices could be about to bounce.

S&P Global Platts Analytics expects Brent crude to push higher this year, with prices expected to trade in the US$70 per barrel to $80/b range before the end of the year on greater likelihood of tighter balances, up from current levels just below $65/b.

Rising seasonal demand, anticipated crude stock draws as refineries return from maintenance, as well as the looming deadline for ship operators to comply with tighter regulations on marine fuel specifications under IMO 2020 rules will all support the market.

“Global recession fears appeared to have been allayed by the renewed dovishness by major Central Banks, spearheaded by the US Fed,” said Chris Midgley, global director at S&P Global Platts Analytics. “Beijing policymakers look determined as usual to dispel any slowdown concerns, but the latest economic indicators paint a rather worrying picture. Trade negotiations between the US and China resumed at the G20 in Osaka providing reason for optimism. Brexit impact fears subsided lately with the UK economy stabilised at a growth rate slightly above the euro zone’s.”

Opec has also played its part. The group and its allies led by Russia have agreed to extend 1.2 million barrels per day of supply cuts for nine months. Meanwhile, the prospects of renewed trade talks between China and the US following the G20 should boost the prospects for global growth.

This should help support US crude exports heading into Asia. US oil shipments to China hit an eight-month high of 189,000b/d in May. Flows into Southeast Asia and India are also expected to increase as more barrels from Iran and Venezuela disappear from the market.

Vietnam and Indonesia have snapped up US crude for the first time. India plans to increase US crude purchases to plug the gap from Iran following the imposition of sanctions.

According to Saudi energy minister Khalid al-Falih, Opec’s action in Vienna this month could help to prevent a 100-million-barrel stock build accumulating during the Northern Hemisphere winter.

“More specifically, the nine-month duration indicates that Opec-plus will remain in wait-and-see mode longer than previously assumed, and raises the odds that they will stick to their pledged volumes through March,” said Paul Sheldon, chief geopolitics adviser for S&P Global Platts Analytics. “If the countries with the most spare capacity — Saudi Arabia, Russia, and the UAE — use their quotas as a ceiling in each month through March 2020, balances could tighten more than we previously expected.”

Iran’s bickering with the US and threats to the Strait of Hormuz have also kept the market on edge. The seizure of an Iranian oil cargo near Gibraltar last week by British security forces prompted Tehran to issue threats of retaliation. Iranian statements on enrichment and storage of uranium have also added to tensions between the Islamic Republic and the international community.

These risks have added to shipment costs for vessels passing through the Strait of Hormuz, which conveys about a fifth of world supply.

However, not all forecasters are convinced a rebound in oil prices can be sustained. RBC Capital Markets expects Brent crude prices to average $69.50/b for the rest of the year.

“While we see room for crude prices to improve, underpinned by a plethora of geopolitical risk factors, we anticipate that rallies will be capped unless refined product demand improves,” wrote Michael Tan, commodity strategist at RBC Capital Markets, in a recent research note. “The market will likely oscillate within a range through the balance of the year.”

Platts Analytics expects weaker oil products demand in India and China to push down refined oil products demand growth in Asia — which accounts for some 55 per cent of global demand growth — to 700,000b/d in 2019, from 930,000b/d in 2018, marking the weakest growth since 2014.

Sambit Mohanty is senior editor, Asia Oil News & Analysis

He lauded the dollar, which he described as reliable, the only real currency in the US and the most dominant currency in the world.

He also said the inherent risk with unregulated crypto assets was that they could lead to criminal activity, specifically drugs trading.

If Facebook and anyone else wanted to become a bank they must seek a new banking charter and become subject to all banking regulations just like other banks, both national and international.

He made it clear he was not a fan of Bitcoin or any other cryptocurrency.

A Thai analyst, meanwhile, says US regulators were unlikely to let Facebook launch Libra.

Such digital currencies can threaten the entire global financial system, said Boonnisead Thanyaworanan, Citibank Thailand’s investment consultant.

If Facebook and its partners wanted to press ahead with Libra they will have to demonstrate how much in assets they are prepared to put behind it. If there are no such back-up assets the digital currency could fluctuate widely and threaten the financial system, he said.

“So far there is no detail but I think it would take considerable time to launch such a currency and US regulators would not approve it easily,” said Boonnisead.

Prominent economists, including Nobel prize laureates Paul Krugman and Joseph Stiglitz, have also opposed Libra and other digital currencies.

The call was made during a meeting on Thursday evening between representatives of the Excise Area 8 Office and the entertainment venue operators at the Baumanburi Hotel in Patong.

Wasin Sitalarom, chief excise officer of Phuket, and Suree Srisuk, director of the excise office of Area 8, briefed the owners on the excise tax requirement.

The officials said the excise law, which was enacted in 1992, has a new provision that has been enforced since September 2017 that requires the Excise Department to levy excise tax on entertainment places at the rate of 11 per cent per year on their revenue.

The officials said the owners of the entertainment places must register their businesses with the department and pay the excise taxes or face a fine and additional interest of 7.5 per cent per year.

But the operators of pubs and other entertainment venues argued that they are already paying taxes at the rate of 7 per cent on their revenue. They called on the excise tax to be indefinitely delayed, saying that the tourism business in the province has become sluggish.

The meeting ended without any conclusion. The officials will inform their department of the objections before answering the operators.