Bank of Thailand governor Tarisa Watanagase met with Finance Minister Chalongphob Sussangkarn yesterday (July 12) over the baht's surge. She said rules would soon be eased for listed companies' portfolios and direct investments.

"We will submit an official proposal to the Finance Ministry and will discuss it in detail with the Securities and Exchange Commission," she said.

Chalongphob, meanwhile, said that any government agencies or state enterprises planning to borrow in foreign currencies would be asked to borrow in baht. The Thai currency could then be used to buy dollars if the agencies needed foreign currency to pay for goods and services.

"The available measures are sufficient to manage the foreign exchange rate. There would be no more measures to stem the baht's increase, no measure that would shock the market," the finance minister said, noting that the government would not impose capital gains taxes on investment in the stock market.

At present, Thai companies are allowed to invest no more than US$50 million overseas per annum. Meanwhile, only institutional investors are allowed to invest in foreign securities, at a maximum of $50 million. So far, according to Bank of Thailand data, institutional investors have utilised only 27 per cent of the approved investment ceiling.

In another development, a plan has been announced to allow individual investors to invest in foreign stock exchanges.

Meanwhile, the Finance Ministry is revising the Public Debt Management Act to allow the government to issue bonds even with budget surpluses. While the revision aims mainly to develop the bond market with a continued issuance of reference government bonds, this could be a channel for the government to mobilise the baht for dollar buying. The revised Act is expected to come into force in the next couple of months.

While brushing aside exporters' requests for intervention, the authorities instead came up with decisions to encourage capital outflows at times when the baht, in the past two weeks, reached several new 10-year highs. The baht yesterday was firmer, closing at 33.32/33.34 against the US dollar after it hit a new 10-year high of 33.18 on Wednesday.

The closure of Thai Silp South East Asia Import Export's plant sparked the latest panic over the impact of the rise of the baht. There is an expectation that more factories may have to close.

Tarisa noted that there were factors that could push the baht up or down against the US dollar. While lower confidence in the US economy would drive investment to elsewhere in the world, this could lead to capital inflows into Thailand, which would buoy the baht further.