Thai Stock Exchange Suspends Trading After Index Dives

[tomyamg00ng]

I think anyone putting money in SET should have their head examined. Everyone know how things are done here. Only those with the right connection have a chance, the rest will lose their shirt.

why is this so bad? Can anyone not get their head around short selling. The whole wllstrret mantra,bloomberg, cnbc, print media is buy and hold, buy and hold. Its as easy to go short a stock as go long yet no one understands this simple concept.

A technical trader would have made a killing today. For every buyer there must be a seller. This money has arrived in someones hands.

"I met an econmist and a fundamental analyst and he dropped a knife and it landed on his foot. I asked him why didnt you catch it and he said he thought it was going to rise up again"

"A trade looks better to a fundamental analysis the more the price goes against him"

Imagine applying that method to Enron, the Nasdaq, which many "experts" did do of course. They are still waiting. The problem is that the optmists of this type of investing have to be right everyday, where as the pessimists only have to be right once. Look at Longterm capital management collapsein 1997. Victor Niederhoffer RIP.

[Finansjohan]

Amazingly stupid new regulation.

Now, foreigners will demand a higher return to compensate for the political risk in Thailand. The question is if investment projects in Thailand are really worth looking at these days since there is a risk of having everything taken away by the generals. Who knows what military folks are up to?

Don't try to tell me this is good for Thailand.

[lopburi3]

According to TV5 there has been a meeting just completed and the order is to be rescinded.

[lannarebirth]

this is a great time to be buying stocks, especially blue chips and sector performers. i been picking up stocks all day.

Never, ever invest in a mrket that does not allow short selling. Short selling acts as a natural braking mechanism for markets and supplies buyers to mark market lows. Emerging markets can be like Roach Motels, you can get in but you can't get out. They can open limit down for days on end. Doesn't mean you can't make money, even a lot of money, but it requires more attention than many other passive investments.

Just did a quick check, I see they do allow shorting now, but it is limited to SET 50 stocks and delivery of borrowed shares must be arranged through a broker.

Edited December 19, 2006 by lannarebirth

[lingling]

According to TV5 there has been a meeting just completed and the order is to be rescinded.

I wonder what good that is. They already sent the world a message, and now everyone will just want to know what their next move will be.

[marshall stanley]

http://money.cnn.com:80/2006/12/19/markets....reut/index.htm?

Best article yet on the matter:

[churchill]

Rules will only apply to bonds and currency traders , so a quick profit could be made by trading the stock market tomorrow am .

this is a great time to be buying stocks, especially blue chips and sector performers. i been picking up stocks all day.

Never, ever invest in a mrket that does not allow short selling. Short selling acts as a natural braking mechanism for markets and supplies buyers to mark market lows. Emerging markets can be like Roach Motels, you can get in but you can't get out. They can open limit down for days on end. Doesn't mean you can't make money, even a lot of money, but it requires more attention than many other passive investments.

Just did a quick check, I see they do allow shorting now, but it is limited to SET 50 stocks and delivery of borrowed shares must be arranged through a broker.

[sriracha john]

Stock market loses Bt500 billion in value : SEC

"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.

- CNN

I'm not so sure about the specifics, but in general I applaud this move by the government. Todays market reaction shows they were correct in that there's a lot of money in Thailand here only to exploit markets. These globalist don't give a shit about the Thai economy or the Thai people. They're quick buck artists. Good riddance.

STOCK CRISIS

It's Black Tuesday

It's Black Tuesday. In a single trading day, the Thai stock market lost Bt800 billion in paper wealth as its key SET index plunged by a record 14.84 per cent - the worst since Black Monday in 1987.

The Nation

Edited December 19, 2006 by sriracha john

[churchill]

According to TV5 there has been a meeting just completed and the order is to be rescinded.

I wonder what good that is. They already sent the world a message, and now everyone will just want to know what their next move will be.

Agreed - What can they do if anything to restore investor confidence . Most people thought that things could not get worse - this is like kicking a dog when it is down , it's going to take a long time for investors to look at thailand again imo .

[britmaveric]

Over 36 for $ - keep rising, want my predictions correct!!

[jumnien]

Ho, Ho, Ho, Merry Christmas!! Holiday sale on Thai stocks - 13 % off! What an early Christmas present. Let's keep our fingers crossed for more of the same tomorrow - go dollar, go dollar - there's some farang pensioners loving every minute of this...

[DFCarlson]

Over 36 for $ - keep rising, want my predictions correct!!

I agree, but the baht's still a long ways from where it was in the Spring.

Keep on truckin'!

Edited December 19, 2006 by DFCarlson

[taxexile]

even by the exceptionally high standards thai politicians adhere to when it comes to errors of judgement and gross mismanagement of affairs , the farcical events of today will take some beating.

monty python , eat your heart out.

[britmaveric]

[DFCarlson]

even by the exceptionally high standards thai politicians adhere to when it comes to errors of judgement and gross mismanagement of affairs , the farcical events of today will take some beating.

monty python , eat your heart out.

You just can't top reality!

[nikster]

Leave it to bbc to write a concise article about this - explains it all...

http://news.bbc.co.uk/2/hi/business/6192157.stm

30% for 1 year rule stays, but exception for equities.

[Meerkat]

Ironically the knee-jerk capital controls, and the equally knee-jerk rescinding of said controls might actually stem some of the hot money allegedly coming into Thailand, as the BOT wanted. With a trainee government this indecisive, who can tell? Who'd want to invest in a "policy-a-day" economy? Wasn't there an article in the Post last week quoting a Justice Minister stating he thought foreigners were making the SET too volatile? Not as volatile as it is now, chum.

The facts that:

a ) the THB hasn't really appreciated all that much against anything other than a sinking USD, and

b ) the SET was always undervalued (lowest P/E ratio in Asia) even compared to basket-cases like Manila, and the coup offered a glimmer of hope for political stability compared to the vacuum we've had since the "democrats" refused to be...er...democratic,

seem to have been overlooked.

Thailand is too entrenched in the global economy to go it alone. Institutional investors have managed to emphasise this point in one day.

The most delicious irony from all of this is the fact that we here on TV were forewarned about the BOT's specific threat of a withholding tax (for it is that, whatever the terminology), on another thread recently by an obviously well-connected poster. If we, the humble falang, knew about it more than a week in advance, what odds would you give on some people more influential than us being in the know?

Oh, and this on the day the newspapers talk about "Eyebrows Raised" regarding those "elected" to the CDA...

[Cyberstar]

this is a great time to be buying stocks, especially blue chips and sector performers. i been picking up stocks all day.

I knew it! - With all that selling out - there must be someone buying.

[Rinrada]

Have they put the New Airport up for sale Yet.......?

[rainman]

Over 36 for $ - keep rising, want my predictions correct!!

i'm going to dream it will be 42.00 by tomorrow morning. i know its just a dream, but i'll sleep well.

[britmaveric]

[JacknDanny]

SET may fall below 600 points

A leading broker predicts Tuesday that the Stock Exchange of Thailand may fall below the 600 points.

Pitthaya Iamkhong-ek, vice president of Bangkok First Investment and Trust, said there was a high chance that the SET index could fall below the 600-point barrier in one or two months because of the central bank's baht curbing measures.

Source: The Nation - 19 December 2006

One or two months? There is a chance that it could fall below 600 today...it is not that far north of 600 right now, about 610 at this point in time I believe.

It was at 545 at 3.30 pm today - so is this a dead cat bounce or something better than that ?

According to ALL reports I have seen , the lowest it ever went to was 587!!!

[cams]

I work in Vegas but family live Thailand and I commute and I send monthly salary to Bangkok Bank when need cash there. This is becoming insane as I pay enough tax without funding the Thai government. This really is getting into why bother category.

It does explain why the bank called after November salary deposited asking what is it for? Guess they dont want poor, now they dont want high income....does anyone know who they do want?

[JacknDanny]

I work in Vegas but family live Thailand and I commute and I send monthly salary to Bangkok Bank when need cash there. This is becoming insane as I pay enough tax without funding the Thai government. This really is getting into why bother category.

It does explain why the bank called after November salary deposited asking what is it for? Guess they dont want poor, now they dont want high income....does anyone know who they do want?

To keep Thailand Thai

[cams]

I think keeping Thailand Thai is great and as someone who has lived in Asia for 20years I hope it continues as is. I am not sure where keeping Thailand Thai fits in with a 30% interest free loan to the Thai government. My money goes on cars, school fees and so on. Doubt that qualifies as currency speculation.

I already made arrangements to use International ATM's and just send in what i really need to do that way. I really am wondering who they are trying to attract though.....not everyone lives on $1000/$2000 a month. I would have thought attracting people that spend would have been a goal. Silly me!

[nikster]

Ironically the knee-jerk capital controls, and the equally knee-jerk rescinding of said controls might actually stem some of the hot money allegedly coming into Thailand, as the BOT wanted. With a trainee government this indecisive, who can tell? Who'd want to invest in a "policy-a-day" economy? Wasn't there an article in the Post last week quoting a Justice Minister stating he thought foreigners were making the SET too volatile? Not as volatile as it is now, chum.

The facts that:

a ) the THB hasn't really appreciated all that much against anything other than a sinking USD, and

b ) the SET was always undervalued (lowest P/E ratio in Asia) even compared to basket-cases like Manila, and the coup offered a glimmer of hope for political stability compared to the vacuum we've had since the "democrats" refused to be...er...democratic,

seem to have been overlooked.

Thailand is too entrenched in the global economy to go it alone. Institutional investors have managed to emphasise this point in one day.

The most delicious irony from all of this is the fact that we here on TV were forewarned about the BOT's specific threat of a withholding tax (for it is that, whatever the terminology), on another thread recently by an obviously well-connected poster. If we, the humble falang, knew about it more than a week in advance, what odds would you give on some people more influential than us being in the know?

Oh, and this on the day the newspapers talk about "Eyebrows Raised" regarding those "elected" to the CDA...

A) Well, the rules for stocks were reversed in one day so I don't think it was very easy to make money off this even if you did know in advance. Sure, some profited, others lost, but thats the case every day on the stock exchange. Keep in mind that even insiders did not know the decision would be reverted on the same day. But I am going to follow TV religiously now so I can profit from the next gaffe...

I continue to be amazed how indifferent traders are to political turmoil. Tons of money is being invested in China, Russia, even Nigeria, Azerbaijan, Kazachstan, etc. They must full well that all their investment could be gone on a whim from these dictatorship-like governments, yet they continue to invest. I don't get it, but Thailand is a haven of stability compared to that.

Russia is probably the most amazing case of all. Here the government actually shut down one of the largest oil producers in the country just because the boss was trying to run for president. Foreign capital to the tune of billions of USD was destroyed overnight. Yet investors continue to pour into Russia like there's no tomorrow.

[Jai Dee]

Bt820-billion blunder

Pridiyathorn quickly halts capital policy and admits record fall of Thai stock market was far beyond expectations

Deputy Premier and Finance Minister Pridiyathorn Devakula yesterday quickly reversed the government's capital-control policy by exempting the ultra-sensitive stock market from a controversial reserve requirement and tax.

In a nationally televised announcement, Pridiyathorn admitted foreign investors had been severely hit by the capital reserve and tax measures, resulting in the Thai stock market's free fall.

Yesterday, the Stock Exchange of Thailand recorded the single biggest one-day loss in its history with Bt820 billion in paper wealth lost as the key SET index plunged by 14.8 per cent.

Regional stock markets also fell in tandem, with Jakarta down 2.9 per cent; Kuala Lumpur down 2 per cent, and Singapore down 2.2 per cent.

Pridiyathorn said the 30 per cent capital reserve requirement would remain intact on funds brought into the country for investing in financial instruments, as well as for borrowings.

However, there would be no such requirement on foreign funds brought into the country for foreign direct investment and for investing in the stock market, starting today.

He said the stock market should recover in stages and admitted that the damage in terms of a massive loss of market capitalisation was far beyond any expectation.

The finance minister said he hoped the negative consequences on the stock market would not be long-lasting, but Piyasvasti Amranand, the energy minister and a former asset management executive, warned there could be long-term negative impacts.

Meanwhile, the Thai baht fell 2 per cent to about Bt36 to the dollar. Until yesterday, the currency had risen by 16 per cent this year against the dollar.

Earlier, Pridiyathorn said the Bank of Thailand had acted in the interests of the private sector, especially exporters suffering from the strong baht, by introducing the capital reserve and tax measures.

The government wanted to take care of the Thai economy over the interests of foreign speculators, but it seemed to have under-estimated the huge negative impacts on the stock market.

Critics said the measures imposed by the central bank were probably too harsh and resulted in the stock market's free-fall.

The central bank allowed foreigners yesterday to keep more baht in the non-resident baht account in order to provide room for them to keep their baht liquidity after the anti-speculation move made them shift capital out of the stock market.

Late in the afternoon, the BOT cancelled the ceiling on outstanding baht liquidity in non-resident baht accounts per person, set earlier at Bt300 million. The ceiling was set because the BOT wanted to cut foreigners' baht liquidity.

However, the central bank moved to cancel the ceiling to allow foreigners to "park" their baht after they got out of the stock market.

On Monday, the BOT announced that Thailand would require a sweeping 30 per cent reserve on foreign capital brought into the country. It meant that if investors or speculators pull back money within three or six months they would lose a 10 per cent withholding tax on the entire amount.

But if they took money back after a year, they would be subject to no tax. In effect, all foreign funds were negatively affected, including those for FDI and investment in the stock, property and other markets.

The negative impact on the stock market was huge, as yesterday's crash was the biggest one-day fall in the bourse's 31-year history.

Source: The Nation - 20 December 2006

[Jai Dee]

BOT allows foreigners to keep more baht in nonresident account

The central bank Tuesday allowed foreigners to keep more baht in the nonresident baht account in order to provide room for them to keep their baht liquidity after the new anti-speculation measure has made them shifting capital from the stock market.

The BOT in late afternoon cancelled the ceiling of outstanding baht liquidity in nonresident baht account per person earlier set at Bt300 million at the end of the day. The ceiling was set because the BOT would like to reduce baht liquidity in foreigners' hand.

However, the central bank announced to cancel the ceiling to allow foreigner to park their baht liquidity after they left the stock market.

Source: The Nation - 20 December 2006

[Jai Dee]

Biggest single-day drop ever

Move to curb rising baht sends investors fleeing in droves

The new currency-control measure by the Bank of Thailand (BOT) has placed Thai stocks at risk of being dropped from international equities indexes like the Morgan Stanley Capital International (MSCI) Index, which international investors use as an indicator for their investment decisions.

However, international credit-rating firms said the measure would not have an immediate impact on Thailand's credit rating.

Yesterday, the Stock exchange of Thailand (SET) Index plunged 14.84 per cent, the biggest one-day fall in the Thai stock market's history, to close at 622.14 points, the lowest in two years.

The SET had to impose its first-stage circuit breaker - a trading halt for 30 minutes at 11.30am - and almost had to impose its second-stage breaker shortly before 3pm, when the SET Index lost almost 20 per cent. The market, however, soon rebounded.

Global index compilers Barra and FTSE said they were studying Thailand's new currency-control measure, requiring financial institutions to hold 30 per cent of any foreign-currency inflows, except those related to exports, for one year. The measure is meant to curb the soaring baht.

"We are monitoring it very closely. Obviously we need to gather all the facts if we are going to take any action," Chin-Ping Chia, MSCI Barra's head of Asian research, was quoted by Reuters as saying yesterday.

FTSE also said it is seeking more information. "We are looking into the situation, and we will be speaking to the relevant parties," FTSE Asia-Pacific research manager Sandra Jim was quoted by Reuters as saying.

ABN Amro Asia Securities (Singapore) said in its recent report there was a real possibility Thailand's weighting in stock indexes, such as the MSCI, would be reduced or even removed, due to the impact of the central bank's latest measure to curb baht speculation.

Thailand has a 2.5-per-cent weighting in MSCI Asia excluding Japan, or 2.8 per cent of MSCI-Far East excluding Japan. Year-to-date foreign net inflow is about US$3 billion (Bt108 billion) compared with SET market capitalisation of about $144 billion. If the period is extended to between January 2005 and November 2006, net foreign buying is about $6.3 billion.

Malaysia was removed from the MCSI when that country imposed restrictions on share investment after the Asian financial crisis 1997.

"However, over the longer term, we think that a potentially negative impact of the measures on real foreign investment will dampen our positive view on the Thai economy. This will likely depress Thai yields beyond the near-term market reaction," ABN Amro said.

DBS Bank said in its research that the scope for a follow-through from yesterday's selling has the potential to send the baht exchange rate lower, to 37 to the dollar.

"Longer term, we believe the central bank is still managing the baht on a trade-weighted basis. This would keep the baht appreciating as long as it is in line with the broad trend for a lower dollar against Asian currencies," DBS said.

Meanwhile, the central bank yesterday allowed foreigners to keep more baht in their non-resident baht accounts, in order to provide room for them to maintain their baht liquidity after the new anti-speculation measure made them shift capital out of the stock market.

The BOT late in the afternoon cancelled the ceiling for outstanding baht liquidity per person in non-resident baht accounts, which had earlier been set at Bt300 million. The ceiling was set because the BOT would like to reduce baht liquidity in foreigners' hand.

However, the central bank announced the cancellation of the ceiling, in order to allow foreigners to maintain their baht liquidity after exiting the stock market.

Standard and Poor's Rating Services yesterday said Thailand's imposition of capital controls to curb its currency appreciation would not have an immediate impact on the country's credit ratings, but the new measure would have long-term economic costs.

The measure will slow foreign capital inflows, which could reverse the country's current-account surplus and hurt the economy, said Kim Eng Tan, the primary analyst for Thailand at S&P.

"It has been very effective in stopping speculative inflows," said Tan, based on the market's performance yesterday. "Definitely, it will work, but it carries long-term costs which have to be balanced with short-term benefits."

Fitch Ratings also said Thailand's credit rating was unaffected by the country's decision to control capital inflows.

James McCormack, a senior director and head of Asian sovereign ratings at Fitch, said Thailand's public finances and ability to generate foreign exchange would remain the same despite the introduction of the measure aimed at curtailing speculative inflows that have pushed its currency to a nine-year high.

Phatra Securities said the impact would be more severe than the market might expect and noted it would apparently be applied to the equity market, unlike past experience in Latin America, where foreign loans and fixed-income investments were covered.

Given this, the negative impact will not be confined to the Thai equity market, but instead will affect the overall economic outlook for some time, Phatra said.

CB Richard Ellis managing director Aliwassa Pathnadabutr said foreign investors were worried about the intervention measures, because they were unclear about the implications that the BOT's reserve requirement on short-term capital inflows would have for the property market.

"I had a call from some major developers asking about the impact of the announcement. There was no specific reference to property in the announcement, and it's not clear how the regulations will affect foreign buyers of condominiums. It is important the Bank of Thailand clarify how the regulations will affect foreign purchasers of condominiums," said Aliwassa.

Boon Vanasin, a director of Piyavate Hospital and owner of 20 hospitals under the Thonburi Hospital Group, said the Bank of Thailand should not have launched a measure that frightened foreign investors.

He said they should have thought of other measures, such as increasing interest rates or taxes that could control baht appreciation, but more gently and more slowly than capital controls.

It would be dangerous for Thailand if foreigners thought the country would suspend or eliminate its free-financing policy, he added.

Source: The Nation - 20 December 2006

[cdnvic]

Reversing this boneheaded decision won't fix what is probably worrying most investors. That the Thai leadership has no real idea of how to handle the economy, and they're prone to erratic and poorly considered decisions.