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  1. #1
    Thailand Expat misskit's Avatar
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    Southeast Asia's strongest currency baht fights own success

    BANGKOK -- Thailand is trying to coax the baht down from six-year high territory as the currency's strength threatens local manufacturing and tourism.


    The central bank has cut interest rates and eased capital controls to rein in emerging Asia's best-performing currency this year.


    It is an ironic twist for a country that became the epicenter of the 1997 Asian financial crisis after its currency collapsed. Thailand now finds that its relatively sound fundamentals have made it a safe haven for capital in Southeast Asia.


    This has resulted in a rising currency that renders Thai exports less competitive in the global market and makes the country more expensive for foreigners to go on holiday.


    The baht traded at 30.3 to the dollar late Tuesday in spot prices tracked by the Bank of Thailand -- barely changed from Nov. 6, when it softened just 0.4% following what the central bank's Gov. Veerathai Santiprabhob hailed as an unprecedented measure.


    The bank cut its benchmark one-day repurchase rate to 1.25%, tying an all-time low, while also making it easier to take funds out of the country as of Nov. 8.


    But analysts have expressed doubts about these moves' ability to take upward pressure off the baht. It has strengthened by about 7% this year, the biggest gain of any emerging Asian currency.


    "It's highly likely the baht will remain strong," said Kota Hirayama, a senior economist at SMBC Nikko Securities, pointing to Thailand's large current-account surplus.


    Meanwhile, the easing measures risk drawing American accusations of currency manipulation at a time when neighboring Southeast Asian nations' foreign exchange policies are under U.S. scrutiny.


    Should the central bank move too strongly to cool down the baht, it risks triggering U.S. sanctions against Thailand as a currency manipulator. In a May semiannual foreign exchange report, the U.S. Treasury Department placed neighboring Singapore, Malaysia and Vietnam on its "monitoring list" of trading partners whose currency practices were deemed to merit attention.


    Since its role as the epicenter of the 1997 Asian financial crisis, Thailand has worked to improve its fiscal health. Thailand's proportion of public debt to gross domestic product is about 40% -- far below neighbors like Malaysia and Vietnam, which stand around the 60% level seen as a dangerous level for emerging markets.


    Thailand also maintains a wide current-account surplus thanks in large part by exports and tourism, which equate to 50% and 20% of GDP respectively. Its foreign exchange reserves stand at about $220 billion, roughly double the tally for the Philippines or Indonesia.


    But the baht's strength has hurt key industrial exports, such as automobiles and electronics. Export values for January-September shrank by 2% on the year, owing partly to the U.S.-China trade war as well. The strong baht also makes travel in Thailand more expensive. The Ministry of Tourism and Sports has cut its foreign arrivals forecast for the year to the range of 39 million to 39.8 million people, down from 40.2 million.


    The central bank's easing of capital controls benefits both individuals and businesses. Limits on sending money overseas were removed for individuals who are moving abroad or have relatives outside the country, while retail investors gained the freedom to directly invest up to $200,000 per year in foreign securities without going through a Thai intermediary.


    Exporters with proceeds of less than $200,000 per bill of lading would also be able to keep those proceeds in foreign currency with no time limit. Eliminating the need to convert proceeds to baht was expected to ease upward pressure on the currency. The measure sets Thailand apart from many Southeast Asian neighbors who have limited capital outflows to keep their currencies firm.


    The easing follows a July move aimed to fight an influx of funds for baht speculation. The Bank of Thailand capped nonresidents' deposit and securities account balances at 200 million baht ($6.58 million) per person, down from 300 million baht. That measure failed to dent the baht's rise, however.


    In 2018, Thailand's trade surplus with the U.S. grew to $19 billion. Until around 2017, the Bank of Thailand intervened as needed to restrain the baht. But the Trump administration's increasing scrutiny on perceived manipulators has made such over action risky.


    Washington has already begun turning up the pressure on Bangkok. Last month, the Office of the U.S. Trade Representative said a number of products imported from Thailand would be excluded from preferred tariff status beginning in April. The USTR's announcement cited failures to sufficiently provide for workers' rights, but the move was seen by some as designed to trim the trade deficit.


    Thai conglomerate Saha Group's Chairman Boonsithi Chokwatana has said that to maintain exports, the baht should trade in the range of 32 to 34 against the dollar. The Thai Chamber of Commerce has said the baht's strength is costing the country 200 billion baht to 300 billion baht in export income, in a heavy blow to the national economy.


    On the other hand, the strong baht gives Thai groups an edge in investing overseas, and could cause a shift in the country's heavy reliance on exports. Charoen Pokphand Foods, the country's biggest food products company, is set to invest 30 billion baht this year in expanding overseas bases, and plans to raise sales abroad to 75% of its total -- up from the current 72% -- in the next three to five years.

    https://asia.nikkei.com/Business/Mar...ts-own-success

  2. #2
    The Fool on the Hill bowie's Avatar
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    http://www.bangkokpost.com/thailand/...peans#cxrecs_s

    Thai resort prices starting to squeeze Europeans
    Destinations closer to home offer better value but strong baht only part of the story
    PUBLISHED : 16 NOV 2019 AT 15:13

    A holiday in a popular beach resort in Thailand now costs as much or more than one in Greece, Italy, Spain, Turkey and Egypt, which is making it harder to attract Europeans to the country, according to a global travel website.

    The report by Skift drew on interviews with a number of Europe-based tour operators, who said their customers’ other concerns included overdevelopment of Thai tourist destinations. Some also complained that the growing focus on Asian travelers in Thailand, especially Chinese, had left some Europeans feeling less welcome.

    The cost of a five-star resort in Koh Samui, Koh Phangan and Koh Samet has reached the equivalent of US$500 per room per night including American breakfast, Skift said, citing figures provided by Diethelm Travel Group, one of the oldest and most established tour operators in Thailand.

    That is similar to the cost of a five-star beach resort in Greece, Italy and Spain, and more expensive than a comparable property in Turkey or Egypt, which costs $350 a night, according to Diethelm.

    Prices for four-star Thai beach hotels also show a similar pattern, according to Diethelm: They cost around $350, as do counterparts in Greece, Italy and Spain, and are higher than the $200 seen in Turkey and Egypt and $300 in Germany, Austria and Switzerland.

    The price of a Thai holiday has increased by about 30% in US dollar terms and 40% in euro terms over the last five years due to the appreciation of the baht and inflation, Skift quoted Diethelm CEO Stephan Roemer as saying.

    “This is definitely too much,” said Roemer, who also owns Switzerland-based Tourasia, which specializes in Asia holidays.

    “Hotels at the well-known resort areas in Thailand are more expensive than comparable resorts in Europe. I fear a negative impact in the medium to longer term (six to 18 months) particularly for the leisure market to Thailand.”

    Thai industry players agree that the strength of the baht, due largely to the country’s healthy current account surplus, is a major concern. The Thai currency is now trading around 30 to the US dollar, compared with 35 just a few years ago.

    “Although there have been many talks to resolve the issue, the baht keeps strengthening, and this is a tough challenge for our tourism industry, I admit that it has a negative impact on our business,” said Danai Wansom, president and CEO of Well Hotels & Resorts Thailand. “I believe, although I do not want to, that the baht could reach below 30 baht to the US dollar.”

    But despite baht appreciation, the Skift report said, “many Thai hotels have raised rates as they can count on Asian first-timers and repeat visitors to continue to flock Thailand”.

    However, a guest mix heavily slanted towards Asia has become an issue for some upmarket European guests, it added.

    “Some of the hotels have shifted their guest mix and sell a bigger percentage to the Chinese market. So the atmosphere in the hotel can change to the point where clients tell us they will not go back. This is a very important issue,” said Ruth Landolt, general manager of Asia365, a Zurich-based firm that offers tailor-made tours to Asia for German-speaking markets.

    Landolt saw a “two-digit drop” in business to Thailand this past summer although the upcoming winter business is “looking good, so we hope for the best”, she said.
    “Thailand still has many places with a competitive edge, and those hotels that have maintained their rates are suffering much less, while those that have not listened and increased their rates considerably are now hitting the market with sometimes crazy reductions,” she said.

    “The destination that is getting a lot of business now is Vietnam,” she added. “We also have a lot of business to Japan, but this is a different market. Thailand is competing with Southern Europe, Egypt, Mexico, and the Caribbean or Indonesia.”
    To David Kevan, a director at Chic Locations UK, the baht and Brexit are least of his concerns. One reason is the tour operator has made a conscious effort to attract more clients aged 55 and up who are less affected by Brexit or the baht, and less tied to rigid travel dates.

    His top complaint with Thailand — and with neighbouring destinations such as Vietnam and Cambodia — is overdevelopment.

    He foresees many hotels in Bangkok, Pattaya, Hua Hin, and Phuket, in particular, being turned into condos in the next few years due to oversupply and owners wanting a quick capital return.

    In Vietnam, certain resort destinations are “unrecognizable” from five years ago, he said, while Sihanoukville in Cambodia “is just a disaster on every level unless your focus is solely on low-end Chinese sex and gambling tourism.”

    Chic Locations’ business to Phuket and Koh Samui is down year-on-year, which Kevan puts down to overdevelopment and “overfamiliarity” rather than Brexit or baht.
    These islands have lost their glamour, he said. “It’s very much ‘been there, done that’. However clients are using the improved air links into both as gateways to travel onto Khao Lak, Koh Phangan and Koh Tao, so our business to Thailand this year on the whole is about 5% up, with Khao Lak, Koh Samed and Koh Kood all performing well.”

    The concern is that these islands will go the way of more established destinations and lose their quality and uniqueness eventually.

    “Most of our clients want to see the uniqueness of Thailand. They are prepared to travel a little longer to discover resorts that are far removed from the mass market. And Thailand has these quiet places in abundance,” said Kevan.

    The Tourism Authority of Thailand has forecast that arrivals from the UK to Thailand will decline slightly to 950,000 this year, from 954,000 in 2018.

    “We consider this number satisfactory, as through this year we have been working on many challenging factors such as, the US-China trade war, the concern about Brexit, and definitely the Thai baht appreciation. Decision-making is no longer as easy as it used to be,” said Tanes Petsuwan, deputy governor of marketing communications, speaking at a Thailand networking lunch at World Travel Market last week.

    Kasikorn Research Center expects the whole European market to Thailand to decline 1.5% this year to reach 6.66 million arrivals, with spending to shrink 1% to 468 billion baht.
    Attached Thumbnails Attached Thumbnails Southeast Asia's strongest currency baht fights own success-c1_1795659.jpg  

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