Exchange controls for foreign portfolio investments. The Boston-based Flying Dragon emerging market fund (FDE) was planning to purchase 1 million shares of Bangkok Bank at the price of THB 129 when the Bank of Thailand introduced a 30 percent interest-rate-free deposit requirement for any new investment in the stock market. The Thai baht stood at THB 36 = US$1 on December 17, 2010. What is the effective exchange rate for FDE, assuming that it plans on holding the Bangkok Bank stocks for one year and that the opportunity cost of tying funds with the Bank of Thailand is 4 percent per annum? What is the likely impact of this new tax on foreign portfolio investment in Thailand?

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.