By Suttinee Yuvejwattana and Beth Jinks

Jan. 9 (Bloomberg) -- Thailand's junta-appointed government

tightened foreign investment rules, imposing new limits on stake

holdings and the use of the country's citizens as nominee owners

of companies.

Foreign investors will be given one year to disclose their

holdings and up to two years to reduce their holdings and voting

rights to less than 50 percent to comply with the new rules

approved by Thailand's Cabinet today, Finance Minister

Pridiyathorn Devakula said. The laws redefined alien business

classifications, and gave a 90-day deadline for Thai nominees to

disclose their holdings, and a one-year deadline for them to

comply with revised limits.

Thailand's investment climate is worsening amid political

instability, foreign ownership probes and recent capital control

policies, Standard & Poor's said in a report yesterday. There is

a ``very strong'' chance the company will lower its outlook on

the Southeast Asian nation's credit rating, S&P's Singapore-based

analyst Kim Eng Tan said today.

``A lot of previous investments that have gone into Thailand

will have to be restructured and even if not a lot of them pull

out there will be some pull out,'' Tan said in an interview

before the rule changes were announced. ``You are going to see

less investment coming in.''

Foreign investors have been ``unsettled'' by ``setbacks'' in

2006, including political unrest leading to the Sept. 19 coup and

probes into the takeover of Shin Corp. led by Singapore's Temasek

Holdings Pte, and other nominee arrangements, S&P said yesterday.

S&P didn't change its BBB+ foreign currency rating, the third-

lowest investment grade, and its stable outlook.

Overseas Investment

Overseas companies and investors yesterday warned they may

pull out of Thailand if the rule change proves to be too onerous.

``This will potentially lead to erosion of foreign

investment in Thailand,'' Peter Van Haren, chairman of the Joint

Foreign Chambers of Commerce, said yesterday.

Political turmoil has already eroded foreign direct

investment, halving the value of new projects approved by the

Board of Investment in the 10 months to October from a year

earlier. About 63 percent of approved projects in the period were

owned by overseas investors.

Amata Corp., Thailand's biggest developer of land for

factories, said Nov. 22 its sales plunged 62 percent in the first

nine months of 2006 as investors delayed projects because of

political concerns.

Details of the legislation were kept secret ahead of today's

Cabinet approval, ignoring calls by the foreign business council,

which represents 28 chambers of commerce comprising more than

10,000 businesses, that its officials be shown the draft.

Temasek, Shin

Investors led by Singapore's state-owned Temasek last year

bought more than 96 percent of Shin, owner of Thailand's biggest

mobile-phone company, from investors, including the family of

former Prime Minister Thaksin Shinawatra. The deal exacerbated

protests and a political stalemate in Thailand that led to

Thaksin's ouster in the coup.

The revised legislation comes after new currency controls

designed to deter speculators in the baht currency triggered a

stock market crash last month.

``The current political disarray has not been helped by the

Bank of Thailand's policy error,'' Standard & Chartered

economists Usara Wilaipich and Nicholas Kwan said in a note to

clients today. ``Thailand's political and economic stability

could be heading for tougher times ahead.''

The Standard Chartered economists cut their forecast for

Thailand's economic growth this year to 4.4 percent from 5.2

percent, and warned of a ``raised risk'' of large capital

outflows.

Currency Controls

The Bank of Thailand imposed currency controls on

international investors buying Thai assets on Dec. 18. A day

later it was forced to exempt share transactions after the

benchmark stock SET Index dropped 15 percent, the most in 16

years. The central bank kept the rules in place for bonds, real-

estate mutual funds and foreign-currency borrowings.

Banks are required to lock up 30 percent of new foreign-

currency deposits earmarked to buy bonds, property funds and

other non-stock investments and will deduct penalties from those

held for less than a year. The rules will stay in effect for at

least three months to six months, central bank Governor Tarisa

Watanagase said on Dec. 26.

Tarisa yesterday reiterated the central bank isn't

considering relaxing the regulations or penalties ``for now.''

Eight bomb blasts in Bangkok on Dec. 31 killed three people

and injured 38, including nine foreigners. Prime Minister Surayud

Chulanont blamed the attacks on ``people who lost their political

power'' following the military coup.

``The perception of Thailand as politically stable was

damaged,'' S&P said in yesterday's report. ``Local sentiment had

turned against foreign investors.''

It's totally... huge.

Bye bye Thailand.

Life goes on. Blah, blah, blah, we will survive and those that want to be here will too.

How much is a ticket to Vietnam?