Thailand mulls sovereign wealth fund

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BahtThailand is again weighing the idea of establishing a sovereign wealth fund from its surplus foreign reserves, a concept that has been mulled for years and caused significant internal debate about the role of the central bank and active currency intervention.

The newest debate revolves around the creation of a so-called New Opportunity Fund, where Thailand’s current foreign reserves of $172 billion or a part of it could be used to invest in higher-yielding assets globally “with manageable risks”, similar to the sovereign wealth funds of Malaysia, Singapore and Brunei.

It would be just one of several measures to improve the Bank of Thailand’s balance sheet after accumulating $17 billion in losses incurred mainly from foreign exchange stabilisation. But the central bank said it will look “very cautiously” at a plan to reduce foreign exchange reserves, as this could affect the stability of the baht. Its board has yet to make a final decision.

Thailand, as other ASEAN nations, is currently struggling with massive capital outflows due to the expected ending of the US’ quantitative easing policy. However, the Bank of Thailand said that capital outflows “have not reached a critical stage yet” and, despite the current account deficit, “economic fundamentals will continue to hold investors’ confidence.”

This year, foreign investors have sold Thai bonds worth 15 per cent of their combined holdings of $25 billion.

Singapore’s 2 sovereign wealth funds, the Government Of Singapore Investment Corporation (GIC) and Temasek Holding, are valued at $248 billion and $173 billion, respectively. Malaysia’s Khazanah Nasional holds around $40 billion, as does the Brunei Investment Agency.

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Reading Time: 2 minutes

Thailand is again weighing the idea of establishing a sovereign wealth fund from its surplus foreign reserves, a concept that has been mulled for years and caused significant internal debate about the role of the central bank and active currency intervention.

Reading Time: 2 minutes

BahtThailand is again weighing the idea of establishing a sovereign wealth fund from its surplus foreign reserves, a concept that has been mulled for years and caused significant internal debate about the role of the central bank and active currency intervention.

The newest debate revolves around the creation of a so-called New Opportunity Fund, where Thailand’s current foreign reserves of $172 billion or a part of it could be used to invest in higher-yielding assets globally “with manageable risks”, similar to the sovereign wealth funds of Malaysia, Singapore and Brunei.

It would be just one of several measures to improve the Bank of Thailand’s balance sheet after accumulating $17 billion in losses incurred mainly from foreign exchange stabilisation. But the central bank said it will look “very cautiously” at a plan to reduce foreign exchange reserves, as this could affect the stability of the baht. Its board has yet to make a final decision.

Thailand, as other ASEAN nations, is currently struggling with massive capital outflows due to the expected ending of the US’ quantitative easing policy. However, the Bank of Thailand said that capital outflows “have not reached a critical stage yet” and, despite the current account deficit, “economic fundamentals will continue to hold investors’ confidence.”

This year, foreign investors have sold Thai bonds worth 15 per cent of their combined holdings of $25 billion.

Singapore’s 2 sovereign wealth funds, the Government Of Singapore Investment Corporation (GIC) and Temasek Holding, are valued at $248 billion and $173 billion, respectively. Malaysia’s Khazanah Nasional holds around $40 billion, as does the Brunei Investment Agency.

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