Business operators have already felt the effects of the Bank of Thailand's draconian 30-per-cent reserve requirement on capital inflows, with Kasikornbank's corporate customers delaying plans to raise funds.

Piti Tantakasem, head of Kasikornbank's capital market department, said yesterday that the bank's wholesale customers who were scheduled to offer baht bonds early next year have postponed their plan until the situation becomes clearer. They intend to wait and see the consequences, if any, of the anti-speculation move by the BOT.

"After the central bank announced its aggressive measure, bond yields have increased significantly. Issuers are uncertain about the success of bond issues, as investors may be reluctant to buy them. Both sides are unable to assess bond yield benchmarks properly," he said.

Kasikornbank forecast that new bond issues next year would be worth between Bt150 billion to Bt160 billion assuming that new bond offering is around Bt37.5 billion to Bt40 billion per quarter. If Thailand's bond market remains volatile, new bond offers could fall in the first quarter next year.

Overseas companies, meanwhile, are likely to delay borrowing from their parent firms due to the BOT's measure, which requires financial institutions to withhold 30 per cent of all foreign investors' capital inflows, this increases their funding costs.

For example, if a foreign business operator borrows Bt100 from their parent firms, they can use only Bt70. But they still have to pay interest on a full loan amount of Bt100, Piti said.

If the two channels of funding mobilisation, bond issues and borrowing from parent firms, are restricted, bank lendingwould rise. In this case, banks might need more funding to cope with higher loan requirements. 

"However, banks have to wait and see how the situation turns out. They also have to see the effects of the BOT's measure. As a result, creditors, debtors and business operators cannot do much at the moment," he said.

"All parties have to wait for clearer policy direction from the central bank."

Somruedi Banchongduang

The Nation