Post by Deleted on Oct 18, 2013 8:05:41 GMT 7
US DEBT STALMATE
Brief relief in Thailand as Congress ends debt stalemate
Business Reporters
The Nation October 18, 2013 1:00 am
Thai authorities and businessmen hailed the US Congress decision yesterday, convinced that this will avert risks for Thailand, albeit in the short term.
The agreement would have a positive impact on the economy, at least psychologically, said Commerce Minister Niwatthumrong Boonsongpaisan. He thanked US lawmakers for reaching an agreement on the budget, but maintained that a failure to reach one would not have impacted Thailand much.
Chularat Suteethorn, the director-general of the Public Debt Management Office, said the agreement could raise the attractiveness of Thai bonds among foreign investors.
Foreign holdings of Thai bonds account for 17 per cent of total outstanding value, down slightly from 19 per cent in the middle of this year. She attributed the fall mainly to the unloading of short-term bonds.
"The Thai bond market has attracted some inflows in October thanks to a delay in the US tapering. Most are for long-term bonds, thanks to substantially high confidence," she said.
The crisis began on October 1 with a partial shutdown of the federal government after House Republicans refused to accept a temporary funding measure unless Obama agreed to defund or delay his healthcare law, known as "Obamacare". It escalated when House Republicans also refused to move on needed approval for raising the amount of money the Treasury can borrow to pay US bills, raising the spectre of a catastrophic default.
Obama vowed repeatedly not to pay a "ransom" in order to get Congress to pass normally routine legislation.
The Congress reached the budget agreement on Wednesday (yesterday Bangkok), which cheered investors and removed the threat of a catastrophic debt default that could have triggered another recession.
Bank of Thailand chairman Ampon Kittiampon does not expect an immediate boost to the Thai economy, as the US economy is slowly recovering. The debt ceiling increase will just ensure normalisation of the economic system.
"The higher ceiling will prevent an impact on the exchange rate as without the agreement, foreign capital would flow out of the US to Asia, including Thailand. That could have led to currency volatility and strengthening of the baht."
He said the political epic serves as a good lesson for Thailand, to see how political decisions could reshape the economy. The episode also raises the Bank of Thailand’s need for more tools in handling capital flows, rather than just the interest policy.
"The global financial market never sleeps. Changes come hourly or daily. How can we adjust to the globalised trend, to ensure greater stability? During March-April, the sharp appreciation of the baht affected a number of small business operators. It's something that the BOT needs to pay more attention to," he said.
Payungsak Chartsutipol, president to the Federation of the Thai Industries, said the US extension of its debt ceiling till February has sent positive signals to the global economy.
"The US should come up with clearer solutions in the next few months. The private sector is more relieved with the confidence that the US government do everything to ensure stability," he said. Payungsak added that the US could not allow any default as it would affect its credit rating.
Isara Vongkusolkij, chairman to the Board of Trade and the Thai Chamber of Commerce, said the US shutdown had no impact on the Thai economy and businesses. From the business point of view, trading and transaction with the US is still normal.
The US extension of the debt ceiling is a positive sign. It should have more time to solve the current problem and prevent a future shutdown, he said.
David Mann, the Regional Head of Research, Asia for Standard Chartered, commented the fact that US economy did not crumble during the shutdown of the US government and the indecisiveness between Republicans and Democrats over the debt ceiling is proof already that things are not as bad as they seem.
However, Mann did admit that a potential cut in ratings for the US economy may be on its way so policy-makers must be careful.
Continuing on a positive note, Mann said the US economy had already bottomed out as its growth is expected to be 2.5 per cent for 2013. The strong fundamentals will see the much talked about quantitative easing (QE) tapering start in March at the latest. A cut in the $85 billion QE will be at the rate of $10 billion to $20 billion per month and finish off in the fourth quarter of 2014.
This may further pressure the US Federal Reserve to consider increasing the policy interest rate possibly 1 per cent.
Brief relief in Thailand as Congress ends debt stalemate
Business Reporters
The Nation October 18, 2013 1:00 am
Thai authorities and businessmen hailed the US Congress decision yesterday, convinced that this will avert risks for Thailand, albeit in the short term.
The agreement would have a positive impact on the economy, at least psychologically, said Commerce Minister Niwatthumrong Boonsongpaisan. He thanked US lawmakers for reaching an agreement on the budget, but maintained that a failure to reach one would not have impacted Thailand much.
Chularat Suteethorn, the director-general of the Public Debt Management Office, said the agreement could raise the attractiveness of Thai bonds among foreign investors.
Foreign holdings of Thai bonds account for 17 per cent of total outstanding value, down slightly from 19 per cent in the middle of this year. She attributed the fall mainly to the unloading of short-term bonds.
"The Thai bond market has attracted some inflows in October thanks to a delay in the US tapering. Most are for long-term bonds, thanks to substantially high confidence," she said.
The crisis began on October 1 with a partial shutdown of the federal government after House Republicans refused to accept a temporary funding measure unless Obama agreed to defund or delay his healthcare law, known as "Obamacare". It escalated when House Republicans also refused to move on needed approval for raising the amount of money the Treasury can borrow to pay US bills, raising the spectre of a catastrophic default.
Obama vowed repeatedly not to pay a "ransom" in order to get Congress to pass normally routine legislation.
The Congress reached the budget agreement on Wednesday (yesterday Bangkok), which cheered investors and removed the threat of a catastrophic debt default that could have triggered another recession.
Bank of Thailand chairman Ampon Kittiampon does not expect an immediate boost to the Thai economy, as the US economy is slowly recovering. The debt ceiling increase will just ensure normalisation of the economic system.
"The higher ceiling will prevent an impact on the exchange rate as without the agreement, foreign capital would flow out of the US to Asia, including Thailand. That could have led to currency volatility and strengthening of the baht."
He said the political epic serves as a good lesson for Thailand, to see how political decisions could reshape the economy. The episode also raises the Bank of Thailand’s need for more tools in handling capital flows, rather than just the interest policy.
"The global financial market never sleeps. Changes come hourly or daily. How can we adjust to the globalised trend, to ensure greater stability? During March-April, the sharp appreciation of the baht affected a number of small business operators. It's something that the BOT needs to pay more attention to," he said.
Payungsak Chartsutipol, president to the Federation of the Thai Industries, said the US extension of its debt ceiling till February has sent positive signals to the global economy.
"The US should come up with clearer solutions in the next few months. The private sector is more relieved with the confidence that the US government do everything to ensure stability," he said. Payungsak added that the US could not allow any default as it would affect its credit rating.
Isara Vongkusolkij, chairman to the Board of Trade and the Thai Chamber of Commerce, said the US shutdown had no impact on the Thai economy and businesses. From the business point of view, trading and transaction with the US is still normal.
The US extension of the debt ceiling is a positive sign. It should have more time to solve the current problem and prevent a future shutdown, he said.
David Mann, the Regional Head of Research, Asia for Standard Chartered, commented the fact that US economy did not crumble during the shutdown of the US government and the indecisiveness between Republicans and Democrats over the debt ceiling is proof already that things are not as bad as they seem.
However, Mann did admit that a potential cut in ratings for the US economy may be on its way so policy-makers must be careful.
Continuing on a positive note, Mann said the US economy had already bottomed out as its growth is expected to be 2.5 per cent for 2013. The strong fundamentals will see the much talked about quantitative easing (QE) tapering start in March at the latest. A cut in the $85 billion QE will be at the rate of $10 billion to $20 billion per month and finish off in the fourth quarter of 2014.
This may further pressure the US Federal Reserve to consider increasing the policy interest rate possibly 1 per cent.