Forex volatility still worrying traders

Exchange rate volatility is the No.1 concern for investors looking to meet trade finance needs, says HSBC.

Volatility remains a threat even as Thai businesses are optimistic about future trade prospects, and demand for trade finance is an upward trend.

Close to 92% of 200 Thai firms are optimistic about their international business prospects, and project trade volume will increase in the next 12 months, above the global average of 77%. Thailand is projected as one of the top three markets surveyed, after Bangladesh and India.

Reasons behind this confidence include an increase in consumer demand for their products (33%), favourable economic environment (31%), and availability of skilled labour (25%).

China is Thailand’s top trading partner (39%), followed by Japan (25%), and the US (16%). Thai firms continue looking for Japanese and Chinese partners to develop trade opportunities, but there is interest in expanding to Myanmar and Singapore.

In line with trade growth, over threequarters of Thai businesses have a larger need for trade finance and a similar number (88%) expects the accessibility of trade finance to increase. Yet, over a third of these companies ranks exchange rate volatility as the largest challenge to meet their trade finance need. High transaction cost (24%) seems to be a less severe challenge in Thailand than it is among other markets in Asia-Pacific, where 37% rank it as one of their main concerns.

Focusing on the impact of government policies, those designed to strengthen regional ties, including China’s Belt and Road Initiative and Asean 2025, were most commonly cited as having a positive impact on international business. Both Asean and South Asian Free Trade Area agreements are also considered to be helpful.

“We see robust trade prospects in 2018, and Thai firms can reap benefits from an upturn in consumer demand and improved economic conditions for their international business,” said Krisda Phatcharoen, head of commercial banking of HSBC Thailand.

The survey, conducted on behalf of HSBC by Kantar TNS, is compiled from responses by decision-makers at over 6,000 businesses, from small and mid-market to large corporations, across a broad range of industry sectors in 26 countries.