| Author | Tip-arpar Karasudhi |
| Call Number | AIT RSPR no. SM-96-46 |
| Subject(s) | Foreign exchange market--Thailand
|
| Note | A research study submitted in a partial fulfillment of the requirements for the Degree of
Master of Business Administration, School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | As the exotic currencies are becoming attractive for investors, the capital flow that
are coming into these countries is dramatically increased. Thailand is one of these
countries that are being considered as a source for making large amount of profits. This
is due to many factors such as the differences between interest rates in Thailand and those
of other countries, the basket of currencies system which is currently employed by the
central bank can facilitate these investors to decide the value of the baht, and less
regulations imposed by the Bank of Thailand towards these investments.
The trading market that offers an opportunity to make a large amount of profit
both for commercial banks and investors is the US$/Baht interbank trading market. This
market was established as a result of the restriction of the Bank of Thailand that imposed
on all commercial banks in the country to have the overbought and oversold positions of
foreign currencies not exceeding 20% and 15% of their capital funds respectively. In
order to stay under these limits, the commercial banks must trade their US dollars among
each other. The department that is in charge of doing the transaction is called the treasury
department and it is believed to be a profit center of a commercial bank. This is because
the trading volume of this market is forecast to be around US$2-3 billion a day, so the
possibility to make large amount of profit is there.
This market is also very attractive to the offshore participants from other financial
centers, mainly from Singapore and Hong Kong. At present, approximately 75% of the
total trading volume in the market is done by these participants. They can contribute both
positive and negative effects to the country. By having them in the market, the exchange
rate is becoming more volatile and the country is perceived to be dependent on their
capital flows. However, they also activate this market and Thai baht is becoming more
acceptable to foreign investors. This can help the country to achieve the goals of having
an international currency and being a financial center in the Indo-Chinese region. The
Bank of Thailand has not imposed any restrictions on these participants yet and still does
not reveal any plan to do so. However, if it intends to set up any regulations, it should be
very careful since it might have an effect on other sectors and the amount of capital flow
from foreign sources. Moreover, the country is still having insufficient amount of
domestic savings available for national development.
In addition to that, this study also looks into the possibility of Thai baht to play
significant role in the Inda-Chinese region and Thailand to be a financial center in the
region. The results have been obtained by looking at the trading relationships between
Thailand and other countries in the region and also the baht accounts held by the IndoChinese residents. It is found that the role of Thai baht as a medium of payment is still
little with the highest amount goes to the trade transactions with Lao PDR and the least
with Vietnam. However, it is hoped that the situation will improve as these countries are
becoming more opened for doing trade and investment with each other. And it is
believed that Thai baht will be used in a larger extent in settling the trade transactions in
the future.
iii
With the op1mons gathered from interviews with relevant personnel, the
possibility of having an international currency and being a financial center is there for
Thailand but with some obstacles to overcome. The country has to improve its quality of
personnel, technology, and connections with other countries. This is because the country
is believed to be in great demand of qualified personnel and it is still less advanced, if
compared with other countries i.e. Singapore, in terms of technological instruments and
connections with other financial markets. If these problems are overcome, combined
with the advantages possessed by the unique characteristics of the country, the aimed
goals would be made possible in the future. |
| Year | 1996 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Gupta, Jyoti P. |
| Examination Committee(s) | Tang, John C. S. ;Swierezek, Fredric W. |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 1996 |