A plunging Thai baht will benefit exporters, but it has wrong-footed many companies with un-hedged US dollar debts, analysts and financiers say. Some also said trade was recovering under its own momentum and did not need an effective devaluation to stimulate growth. All analysts said they were surprised by the timing of the decision to scrap the link between the baht and a basket of currencies, mainly the US dollar. But they said many of the large corporates with high exposure to the US dollar had suspected this form of Government response and had hedged their currency exposure. Daiwa Institute of Research's Bangkok-based research director, Peter Schiefelbein, said: 'We think that removing the uncertainty over the defence of the baht will be beneficial.' The managing director of Deutsche Morgan Grenfell in Bangkok, Graham Catterwell, said: 'Something had to be done. The longer you delay the issue the harder it becomes. 'It is painful but makes sense.' SBC Warburg associate director Ian Gisbourne said: 'This is an encouraging first step. We welcome it but believe other measures need to be taken to address the long-term problems.' The anticipated fall in domestic interest rates - variously tipped at between two and three percentage points - will stimulate domestic demand. The immediate position for exports is less clear, because between 40 and 60 per cent of the country's raw materials are imported. A rising cost of imports will partly negate the impact of a lower baht. Over the longer term, lower costs for value-added services will make its exports more attractive. About a third of exports are from labour-intensive exports, such as textiles, garments and footwear, for which the raw materials are imported. Exports of electronic goods, which constitute about a third of the country's exports, are likely to benefit from the lower value of the baht. Merrill Lynch estimates the full benefit of a lower baht will not be felt for another 12 to 18 months. It claims that as Thailand was emerging from the 1996 export trough faster than its regional rivals - year-on-year growth in April topped 8.8 per cent - the recovery was already underway. Mr Catterwell said the high level of imports used in exports would lessen the immediate impact. Mr Schiefelbein said the immediate downturn in domestic demand caused by the higher interest rates would be offset by a rise in demand for exports. Importers, possibly anticipating a devaluation, had run down inventories on some goods, such as Thai canned fruit and seafood, he said. Experts said the impact of a falling baht on the external debt burden of Thai corporates would become apparent as they posted their third-quarter results. Mr Schiefelbein said a quarter of bank earnings would be wiped-out through unrecovered foreign exchange losses. About 40 per cent of Thailand's estimated US$90 billion external debt is un-hedged and has maturities within one year, Merrill Lynch said. Other analysts, such as SBC Warburg's Mr Gisbourne, believed the large corporates had probably hedged in anticipation of a devaluation.