Bloomberg.com: Thailand's Central Bank May Lift Controls on Bond Investments

Thailand's Central Bank May Lift Controls on Bond Investments

By Anuchit Nguyen and Shanthy Nambiar

Jan. 27 (Bloomberg) -- The Bank of Thailand may lift restrictions on foreign investment in fixed-income securities, including long-term bonds, after earlier saying it also plans to remove curbs on foreign-currency loans.

``We will also study the possibility of relaxing controls on long-term bonds,'' Governor Tarisa Watanagase said yesterday in Bangkok at a business seminar. ``The baht measure is temporary. We will lift it as soon as the baht stabilizes. We will also study the possibility of tracking investors in short- term securities such as commercial paper.''

Thailand is seeking to weaken the currency to help prevent prices of exports, which make up 60 percent of the economy, from rising. The baht rose 16 percent against the dollar last year, the best performer among 15 Asia-Pacific currencies tracked by Bloomberg.

The central bank on Dec. 18 imposed rules requiring local banks to withhold 30 percent of new foreign funds and penalizing investments of less than a year. The measures, aimed to curb speculation on the currency, triggered the steepest slide in the Thai stock market in 16 years.

The rule was abandoned for equity funds a day later, although it remains in place for bonds and real-estate mutual funds.

Companies investing in Thailand will be exempt from the requirement that 30 percent of their funds borrowed abroad are withheld if the loan is hedged for at least one year, Tarisa told reporters yesterday at a seminar organized by the Agriculture Future Exchange of Thailand. Details of the eased requirements will be announced next week.

``If the relaxation of hedged loans is effective in preventing speculation on the baht, the central bank may ease control on investments on long-term bonds,'' she said at the dinner meeting.

To contact the reporter on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net .

Last Updated: January 27, 2007 00:20 EST