Goldman Sachs: BOT To Stem Strength; We Expect THB To Underperform NJA

Goldman Sachs note that "the Bank of Thailand announced three key measures to help stem THB strength. First, liberalizing rules around foreign currency deposits. Second, relaxing investment rules in foreign securities by Thai residents. This includes lifting the investment limit for retail investors from USD200K to USD5mn and no foreign investment limit for investors regulated under the SEC, which includes asset managers. Third, requiring foreign investors to engage in one-time registration process, which will help BOT's bond surveillance system. We think the lifting of foreign investment limits for retail and local institutions is quite meaningful, but this is unlikely to have an immediate effect. The pre-trade registration may be cumbersome for some investors, but we do not think it will trigger any change to Thailand's status in global bond indices, since it just a one-time registration and not for every trade. USD/THB traded slightly lower after the announcement, as the market had pre-positioned for some FX rules to be announced since the MPC meeting. Over the short run, the THB could continue to benefit from positive vaccine news, and, over the long run, we expect USD/THB to trade lower in line with our bearish USD view. Still, the THB should underperform NJA peers, in our view, as lackluster tourism acts a drag on the external balance and ongoing protests weigh on foreign investment."