Does the new administration in Bangkok have a grip on the
economy? Or is it time to bail out of Thailand with the removal of
Thaksin?
BANGKOK - Thai stocks suffered their biggest drop since Asia's 1997
financial crisis as foreign investors took fright at drastic
measures to rein in the baht, prompting calls for a central bank
U-turn.
The currency dropped 2 per cent from Monday's 9-1/2-year high after
the central bank, worried strength in Asia's best-performing
currency would hurt exporters, slapped controls on short-term
speculative money inflows.
The main stock index plunged more than 13 per cent to a two-year
low at one point, wiping more than US$20 billion (S$31 billion) off
the value of South-east Asia's third-largest bourse.
Other Asian stocks also fell in tandem with the plunge in Thai
shares. The Straits Times Index in Singapore dived 51.37 points to
2,912.07 at 4.15 pm.
Reaction in the bond markets was equally ruthless as foreign
investors rushed for the exit, forcing prices sharply lower and
pushing yields up 20 to 30 basis points for all maturities.
'Please call an ambulance, there is a bloodbath,' a dealer at a
domestic brokerage said.
'Foreign players seem to be selling all maturities today, but I
think it's only the first round. There is a lot of money already in
the Thai markets. If they're pulling out, we're dead,' he said.
'I'm not sure if we're going to get a bonus this year.'
After the stock index ended the morning 11.76 per cent down, bourse
president Patareeya Benjapolchai begged the Bank of Thailand to
review its policies.
Too soon for baht review: central bank
But the central bank retorted it was too soon for any review of a
measure analysts described as 'draconian' and a 'straitjacket' for
equity investors.
Selling frenzy
The reaction was far more severe than the 4 per cent stock market
fall - and quick recovery - that followed the bloodless Sept 19
coup that ousted Prime Minister Thaksin Shinawatra and ended a long
political crisis.
The stock market decline threatened to be the biggest one-day
sell-off since the 1997/98 meltdown, which was caused in part by
massive international speculation against the baht.
In an unprecedented move in the stock market's 31-year history,
officials halted trading for half an hour when the index fell 10
per cent. When it resumed, the slide continued.
If it dropped a further 10 per cent, trading would be halted again
for an hour, one official said.
'There's heavy selling from foreign investors because the new
measures are quite aggressive towards foreign fund flows,' Tisco
Securities strategist Viwat Techapoonpol said. 'It is hard to
forecast how many per cent the SET will fall.'
The baht, the fastest-rising Asian currency against the greenback
this year, was trading around 35.70 per US dollar at 0540 GMT
(1.40pm Singapore time), down 1.8 per cent from 35.06 early on
Monday before the central bank announced its latest steps to halt
currency speculation.
It dropped as low as 35.97 per dollar after the central bank
announced the baht restrictions.
Under the measures, investors will have to keep their money in
Thailand for at least a year or face stiff financial penalties. The
new regulation affects all sums over US$20,000 not linked to trade
or foreign direct investment. -- REUTERS
(Straits times 18 Dec)
