Thailand May Get $200 Million China Investment Quota Under QFII Program

The Bank of Thailand may get a $200 million quota from China for the qualified foreign-institutional investor program, Deputy Governor Suchada Kirakul said in an interview in Bangkok today.

Thailand’s central bank plans to sign a custodian agreement with HSBC Holdings Plc to invest in the North Asian market under the so-called QFII program once the quota is allocated from the State Administration of Foreign Exchange, Suchada said. The central bank got approval for the QFII license from the China Securities Regulatory Commission on Jan. 16, she said, adding that the monetary authority requested a $1 billion allocation.

“We have to wait for the quota from SAFE and we were told it would take about three months,” Suchada said. “Once we get the quota, we can start investment.”

China is promoting the use of the yuan in global trade and investment as overseas demand for the currency increases. There are about 67,000 Chinese companies with whom Thai corporations can use the yuan for trade, according to Suchada, who said the central bank is looking to increase settlement in the currency by 50 percent this year from $170 million in 2011.

The Bank of Thailand also got approval to invest 7 billion yuan ($1.1 billion) in local-currency bonds through the interbank debt market, the deputy governor said. The central bank has opened a yuan account with the People’s Bank of China to convert the dollars into yuan, also known as the renminbi, and is in the process of signing agreements with five brokers to trade in China’s market, Suchada said.

“We don’t have any renminbi now, so we have to convert the dollars into renminbi with the PBOC,” she said. “We also need dealers to buy and sell them. It could be trading soon.”

Swap Agreement

The yuan advanced 4.4 percent against the dollar in the past 12 months, the best performance among Asia’s 11 most-active currencies, according to data compiled by Bloomberg. The renminbi rose 0.07 percent to 6.2945 versus the greenback as of 2:58 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency may strengthen 2.9 percent to 6.12 by year-end, according to the median estimate of analysts surveyed by Bloomberg.

Thai and Chinese central banks signed a 70 billion yuan swap agreement in December to strengthen investment between the two countries. The three-year swap will probably help increase yuan settlement with Thai companies, Suchada said. The Bank of Thailand has also worked with commercial banks including Bangkok Bank Pcl and Kasikornbank Pcl on a project to promote yuan settlement, which Governor Prasarn Trairatvorakul said in December was “not that successful.”

The $170 million in yuan settlement for exports and imports last year accounted for 0.25 percent of the total trade with Chinese companies, according to Suchada.

“Exporters on our part don’t know who would be eligible and regulation is also not clear,” she said. “The liquidity of the renminbi in Thailand isn’t as liquid as the U.S. dollar, so the quotation isn’t attractive.”

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net; Stephanie Phang at sphang@bloomberg.net

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