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US dollar denominated gold trade to be allowed

Jack Burton

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US dollar denominated gold trade to be allowed | The Thaiger
PHOTO: Tasty Thailand
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Ending decades of regulations limiting gold trade in Thailand to the baht, the US dollar will now be allowed as well. 2 weeks ago, in a bid to slow the rapidly rising baht and avoid landing on the US list of “currency manipulators”, the Bank of Thailand announced a policy to allow trading gold products in US dollars. Market players say the central bank will consider dollar-denominated trade for foreign-related capital market products in the near future. A source familiar with capital markets said:

“The investment world has changed. Domestic investment alone is not suitable and diversifying overseas is better. Thais should be gradually educated about foreign exchange risk. Relaxing rules and letting people open foreign currency deposit accounts freely is one measure to help people understand risk related to foreign asset investment.

The Thailand Futures Exchange and the Stock Exchange of Thailand have long requested permission from the Bank of Thailand to trade foreign-related products like gold online futures, oil futures and foreign equity products in US dollars, but it was denied because the Currency Act of 1958 mandates that trading goods and services in Thailand must be conducted in baht.

US dollar denominated gold trade to be allowed | News by The Thaiger

A former regulator at the central bank, speaking on condition of anonymity, said gold trading is speculative and does not create economic value, but with the right implementation, trading gold or assets in foreign currency terms could be a good risk management tool.

“I understand the central bank’s purpose in allowing trade of gold in dollars because gold imports and exports could disrupt the trade balance and the exchange rate. It would be better if the impact of exchange rates is separated from gold import/exports.”

He says currencies and interest rates are quite complicated and traded among big players, thus trading gold in dollars will be more advantageous for those with high net worth.

Trading gold in dollars may take a few years of adjustment, he added.

MTS Gold Futures’s CEO says it could take a few tries until the market adjusts as the structure of the gold business in Thailand has many moving parts: customers, gold retailers, gold exporter/importers, and commercial banks, which offer currency exchange and FCD.

“The current infrastructure is not ready yet. How can people trade gold in dollars if they lack a dollar currency account?”

Few Thais own FCD accounts and if they are not exporter/importers and want to have US dollars, they have to go to bank branches to exchange baht for dollars and bring ID cards or documents related to travelling overseas.

Domestic gold buyers are divided into 2 types: collectors who are willing to buy gold and hold it (like retail investors buying corporate bonds for interest return to hold to maturity), and gold speculators who trade in the short term for profit.

“Most speculators deal in daily domestic bullion trade, where someone trades gold in the global marketplace in dollar terms. Those unfamiliar with exchange rate risk trade derivatives of gold online futures on TFEX.”

Collectors prefer to buy physical gold to collect as individual reserves for a long time (sometimes decades or even generations). When the economy tanks or the price hits a high point, they sell their reserves. Then businesses export excess gold, bringing money into the country.

“Thais accumulate gold in individual reserves for many decades. This is a unique mechanical difference from the other countries. Most Thais love to accumulate physical gold in their personal reserve.”

US dollar denominated gold trade to be allowed | News by The Thaiger

SOURCE: Chiang Rai Times | Bangkok Post

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1 Comment

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    Toby Andrews

    August 13, 2020 at 3:39 pm

    I think I have read this right. Gold can now be bought with US dollars, where before it could only be bought with Thai baht.
    Thailand is afraid the US will accuse Thailand of currency manipulation, which is certainly true if the Thai authorities do not allow foreign currencies to be used for trade in Thailand. This announcement might be to refute that accusation,
    However, at what rate will the Thais allow the Thai baht to be traded for US dollars?
    If this rate is fixed to the advantage of the baht, again this is currency manipulation. I expect this will be the case. They will fix the rate of exchange.
    To counter this, many Thais will find a way around this. Such as buying US dollars in ATMs in Cambodia, which is no problem with foreign accounts, and then smuggling US currency back into Thailand. And they will employ other methods.
    I await notifications of the battles of the both sides with interest.
    Whatever happens the Thai baht seems certain to go down.

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Jack Burton is an American writer, broadcaster, linguist and journalist who has lived in Asia since 1987. A native of the state of Georgia, he attended the The University of Georgia's Henry Grady School of Journalism, which hands out journalism's prestigious Peabody Awards. His works have appeared in The China Post, The South China Morning Post, The International Herald Tribune and many magazines throughout Asia and the world. He is fluent in Mandarin and has appeared on television and radio for decades in Taiwan, Mainland China, Hong Kong and Macau.

Business

Thai Vietjet introduce new “Deluxe” product for domestic routes in Thailand

Maya Taylor

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Thai Vietjet introduce new “Deluxe” product for domestic routes in Thailand | The Thaiger
PHOTO: www.vietjetair.com

Thai Vietjet, which currently operates 13 domestic routes within Thailand, is launching a new “Deluxe” product, starting from 999 baht. The “Deluxe” tickets will include 7 kilos of carry-on and 20 kilos of checked luggage (currently an additional charge), as well as seat selection and priority check-in. Date, route and flight changes are also permitted 1 time, free of charge.

Deluxe fares are available for travel between October 6 and December 31, excluding public holidays, on all domestic routes operated by the carrier. The 999 baht price tag does not include taxes and fees. Thai Vietjet is adding a number of new routes to its current network, including Chiang Rai to Hat Yai from November 1, and Bangkok Suvarnabhumi to Hat Yai, Khon Kaen, Nakhon Si Thammarat, Ubon Ratchathani, and Surat Thani from November 4.

The airline’s full network of domestic routes can be viewed at www.vietjetair.com. It also operates a number of international routes between Thailand and Vietnam and between Thailand and China, but not at the moment.

SOURCE: Chiang Rai Times

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Economy

Vietnam’s booming manufacturing sector reduced to a trickle as world pandemic kills demand

The Thaiger

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Vietnam’s booming manufacturing sector reduced to a trickle as world pandemic kills demand | The Thaiger

Vietnamese finance officials are downgrading expectations for a recovery of the south east Asian nation’s economy in 2021. The normally fast-growing gross domestic product in 2020 has stalled due to a huge drop in local and global demand, and the absence of international tourism. The booming economy, growing at an average of 6% per year since 2012, will struggle to reach a growth rate of 2% this year.

Fuelled by manufactured exports, the Vietnam economy has dropped back to a trickle. The Asian Development Bank estimates that this year’s GDP growth could be as low as 1.8%. The Vietnamese factories, that usually crank out shoes, garments, furniture and cheap electronics, are seeing dropping demand as the world’s consumer confidence drops dramatically.

Stay-at-home rules in Europe and America are keeping are keeping people away from retail stores. And despite the acceleration of online retail, many of the consumers are emerging from the Covid Spring and Summer with vastly reduced spending power.

The headaches of 2020 are also challenging Vietnam to maintain its reputation as south east Asia’s manufacturing hotspot. Rising costs and xenophobic foreign policy have put China ‘on the nose’ with some governments, complicating factory work in China, whilst other south east Asian countries lack infrastructure and are incurring higher wage costs.

One Vietnamese factory operated by Taiwan-based Pou Chen Group, which produces footwear for top international brands, has laid off 150 workers earlier this year. There are hundreds more examples of the impact of falling demand in the bustling Vietnamese manufacturing economy.

Vietnam’s border closure is also preventing investors from making trips, setting up meetings and pushing projects forward. Those projects in turn create jobs, fostering Vietnam’s growing middle class. Tourism has also been badly affected by the restrictions on travel. “International tourism is dead,” says Jack Nguyen, a partner at Mazars in Ho Chi Minh City.

“Inbound tourism usually makes up 6% of the economy.”

“Things will only pick up only when the borders are open and there’s no quarantine requirements. Who knows when that’s going to be.”

A mid-year COVID-19 outbreak in the coastal resort city Danang followed by the start of the school year has reduced domestic travel, analysts say. Some of the country’s hotels are up for sale as a result.

“Recovery could take 4 years.”

The Vietnamese Ministry of Planning and Investment is now warning that global post-pandemic recovery could take as long as 4 years, perhaps more.

Not that foreign investors in the country are pulling out. Indeed, many are tainge a long-term view that Vietnam’s underlying strengths will outlive Covid-19. Vietnam reports just 1,069 coronavirus cases overall.

SOURCE: VOA News

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Thailand

Thai Air Asia returns to Suvarnabhumi in addition to its Don Mueang hub

The Thaiger

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Thai Air Asia returns to Suvarnabhumi in addition to its Don Mueang hub | The Thaiger

Thai AirAsia is spreading its Bangkok wings and opening up a secondary hub at the main Suvarnabhumi airport (BKK), to help broaden its attraction and bolster its bottomline. Thai Air Asia was the first airline to head back to the moth-balled Don Mueang in 2012 to re-establish the older airport after all the airlines moved across to the new Suvarnabhumi and discount airlines were seeking a lower-cost base.

Although Thai Air Asia carried 22.15 million passengers last year, this year’s total will fall a long way short, just 6 million for 2020 up to date. Under the new set up, Thai AirAsia will have resumed nearly 90% of its pre-Covid domestic services, a total of 109 daily flights to 39 destinations. There will be 97 flights from Don Mueang Airport and 12 from Suvarnabhumi Airport.

With only a handful of international traffic, Suvarnabhumi officials are keen to re-kindle revenue for the massive airport and have struck a deal with Thai Air Asia to trial operations from BKK. They will be the only domestic carrier to operate flights from the two airports.

If the 2 month trial at Suvarnabhumi is successful, Thai AirAsia plans to add another plane to the BKK fleet by the end of the year. At this stage the trial is only approved up to the end of November.

Thai Air Asia have been concentrating on their ‘bus’ model to ferry passengers from the terminals to their aircraft waiting on remote airport aprons, and visa versa, to avoid some of the landing charges and using the sky-bridges. Some passengers have been complaining about the long trips in crowded buses, wild rides and over-enthusiastic air conditioning, whilst being told to strictly adhere to social distancing.

This week the Malaysian parent company Air Asia, announced the introduction of a ‘super app’, in an attempt to off-set the significant financial losses brought about by the Covid-19 pandemic. The mobile application shuffles Air Asia’s model as a flight and accommodation provider, to a broader platform of complimentary services. The app will offer users a variety of options, including digital payment services, delivery services, and an e-commerce platform. Air Asia Chief Executive and founder, Tony Fernandes, says the idea for the app was floated prior to the pandemic, but Covid-19 hastened its development.

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