Guil Silva, HSBC’s new head of global markets in Thailand, sees a bright outlook for the region.
The baht has been one of the better performing currencies in the region this year, gaining 4% against the US dollar and reviving fresh debate about the impact on exporters and the economy.
The sluggish pace of economic recovery and ongoing ultra-loose monetary policies in the US, Europe and Japan, coupled with Thailand’s own strong economic fundamentals and growth, makes further appreciation nearly inevitable.
“Thailand has low unemployment and very good economic growth and fundamentals,” Guil Silva, the treasurer and head of global markets for HSBC in Thailand, told the Bangkok Post.
Mr Silva took over as head of global markets in Thailand in February after holding the same position in Spain.
The 36-year-old Brazilian has worked for HSBC for 12 years including postings in London and Madrid.
“It’s my first posting in Asia, and I’m very happy to be here. Thailand is the right place to be at the moment,” he said.
“Southeast Asia including Thailand will continue to have a competitive advantage.”
Mr Silva said Europe is gradually recovering, although further volatility and hiccups such as the Cypriot banking crisis can happen.
“Cyprus accounts for just 0.14% of European GDP. The real issue is the implications for the rest of the euro zone,” he said.
“Europe as a whole has a low public deficit of 3.5% and relatively low debt-to-GDP compared with the US or Japan. But the question is whether the bloc will stay united.”
The tense negotiations last month between Cypriot authorities and the “troika”, comprising the International Monetary Fund, the European Commission and the European Central Bank (ECB), helped to rattle financial markets with fresh fears that participation in the euro may not be irrevocable after all.
Cyprus ultimately agreed to close its debt-ridden banks and force losses upon its depositors in exchange for a 10-billion-euro bailout.
Mr Silva said as a bloc, economic conditions in the euro zone are improving.
HSBC sees the euro appreciating against the dollar in the medium term, with a target of $1.35 this year and $1.40 next year.
“At the end of the day, I think the political will to solve the problems is there. There is a recognition that staying united [under the euro] is better than the alternative,” Mr Silva said.
“Still, it’s like a sick patient who goes to the doctor and is told that surgery is needed. The ECB is providing painkillers. But that doesn’t obviate the need to have surgery.”
The extent of the economic damage in countries such as Greece, Italy and Spain could take years to repair.
“There are 2 million empty houses in Spain. Right now, there are more empty houses in Spain than in the US. This will take time to digest,” said Mr Silva. “Europe is trying to attract interest from foreign investors in Russia, Brazil, China and Thailand.”
Asia is a different picture. Japanese Prime Minister Shinzo Abe’s moves to push the Bank of Japan to loosen monetary policy further will affect Japan and Southeast Asia including Thailand, said Mr Silva.
Thailand also stands to gain from China’s continued growth. HSBC projects China’s economy to grow by 8.6% this year, well above consensus forecasts of 8.2%.
“Overall I am very optimistic for Thailand. The ‘risk on, risk off’ model is breaking down, and we see more differentiation now. Investors are buying German bonds as well as Thai assets,” he said.
“Internationalisation is the major theme for our clients today. Thai companies are looking abroad to India, the Middle East, even Latin America as well as within the region.”