Thai Stock Exchange Suspends Trading After Index Dives

[thedude]

SET closes at 688.17 this afternoon

Trading at the Stock Exchange of Thailand today (Dec 20) closed for the afternoon at 688.17 points, up 66.03 points from the day before.

The SET gained 66.03 points to stand at 688.17 points during the afternoon recess; the index increased 10.61% with total trade value at 34.850 billion baht. The 5 top performing stocks were in the PTT company, which closed at 214 baht, up 28 baht, the Siam Commercial Bank which closed at 61.50 baht, an increase of 8 baht, the Bangkok Bank which closed at 113 baht, up 10 baht, the Kasikorn Bank which closed at 64.50 baht, up 7 baht, and the Krung Thai Bank which closed at 12.70 baht, an increase of 12 baht.

The SET 100 index closed this afternoon at 1,050.11 points, up 108.82, and increase of 11.56%, with total trade valued at 26.836 billion baht. Meanwhile the MAI index closed this afternoon at 190.54 points, up 12.75, an increase of 7.17%, with total trade valued at 136.11 million baht.

Source: Thai National News Bureau Public Relations Department - 20 December 2006

well done KTB! it must have been the greatest gain in the history of stock trading.

[Jai Dee]

SET closes at 688.17 this afternoon

Trading at the Stock Exchange of Thailand today (Dec 20) closed for the afternoon at 688.17 points, up 66.03 points from the day before.

The SET gained 66.03 points to stand at 688.17 points during the afternoon recess; the index increased 10.61% with total trade value at 34.850 billion baht. The 5 top performing stocks were in the PTT company, which closed at 214 baht, up 28 baht, the Siam Commercial Bank which closed at 61.50 baht, an increase of 8 baht, the Bangkok Bank which closed at 113 baht, up 10 baht, the Kasikorn Bank which closed at 64.50 baht, up 7 baht, and the Krung Thai Bank which closed at 12.70 baht, an increase of 12 baht.

The SET 100 index closed this afternoon at 1,050.11 points, up 108.82, and increase of 11.56%, with total trade valued at 26.836 billion baht. Meanwhile the MAI index closed this afternoon at 190.54 points, up 12.75, an increase of 7.17%, with total trade valued at 136.11 million baht.

Source: Thai National News Bureau Public Relations Department - 20 December 2006

well done KTB! it must have been the greatest gain in the history of stock trading.

I suspect a typo by the TNNBPRD reporter.

[rainman]

Can't they follow our lead and find candidates (or appointees) with the brilliance of George W. Bush or Tony Blair, we're really talking quality there, for sure.

Not to go off topic here, but i always spilled my drink.

[Jai Dee]

Thai Bankers Association chairperson is confident in measure of BOT to solve SET problem

Thai Bankers Association chairperson Jada Wattanasiritham expressed confidence that foreign investors will be less concerned with the state of the Stock Exchange of Thailand (SET) after Deputy Prime Minister and Finance Minister M.R. Pridiyathorn Devakula yesterday withdrew the measure to deduct 30 percent of capital reserves. She said the measure will have no effect on the confidence of foreign investors. She said the preventive measure being implemented by the government is efficient and highly adaptive to the changing situation.

Khunying Jada also said the central bank and the Ministry of Finance are intent to curb the strength of the baht currency because it has considerably affected the country’s export.

Source: Thai National News Bureau Public Relations Department - 20 December 2006

[Old Man River]

No, they were not driven by xenopobia, and the lesson wasn't about how much they need foreigners either. Driving out foreign investors wasn't in the plan.

The lesson was they completely misjudged it. No matter how good or bad were their intentions, they have shown incompetence to the highest degree.

I agree with your comments (see, we can agree once in awhile). The bottom line is that nobody in Thailand and I mean nobody has the experience to deal with these speculators. The speculators are counting on this. There will always be people in the background that say they could have done better, but the fact is that the Thai government (no matter who is in the Thai government) does not have experience in dealing with these matters. I fully expect that foreign advisors were involved in this decision and that they got it wrong as well.

The good news is that the FM and BOT quickly admitted it was a mistake and reversed their position. Those of us that are Americans are still waiting for our government to admit they were incompetent and made a mistake on Iraq, but not all governments are that open and quick to admit their errors. The bad news is that the speculators now believe they can attack the equity markets with a free hand. A bad decision will be if the current government changes personnel as the FM and BOT are the same people that many have had high opinions of (remember Dr. Thaksin wanted to change MR Pridiyathorn when he was BOT Governor, but was advised that foreign investors have too high an opinion of him to make such a change).

The bottom line is that the FM and his people are the best that Thailand has, and mistakes aside, these people are the best chance the government has to chase the speculators out of attacking Thailand to attacking another country. They may lose battles, but these are the best available to win the war.

[LaoPo]

Thai Bankers Association chairperson is confident in measure of BOT to solve SET problem

Thai Bankers Association chairperson Jada Wattanasiritham expressed confidence that foreign investors will be less concerned with the state of the Stock [/u]Exchange of Thailand (SET) after Deputy Prime Minister and Finance Minister M.R. Pridiyathorn Devakula yesterday withdrew the measure to deduct 30 percent of capital reserves. She said the measure will have no effect on the confidence of foreign investors. She said the preventive measure being implemented by the government is efficient and highly adaptive to the changing situation.

Khunying Jada also said the central bank and the Ministry of Finance are intent to curb the strength of the baht currency because it has considerably affected the country’s export.

Source: Thai National News Bureau Public Relations Department - 20 December 2006

This is really unbelievable; maybe she doesn't read the financial news from all over the world ?

High-So Thai incompetent financial big-shots trying to save-face....

The harm has been done already and Thailand will suffer big, very big, since the foreign investors/institutions will stay away for a long time.

LaoPo

[jumnien]

More than 70% of yesterday's losses were wiped out today as the value of Thai stocks increased over 550,000,000,000 baht in one day. The freefall of the dollar in baht terms has been halted and indeed is now headed in the intended direction (2% improvement today). I am absolutely no fan of the present administration and have no agenda with these financial wizards, but good things are happening today! Let's hope it continues.

[Plus]

I think they should fire Pridiyatorn as quickly as possible. In one day he has lost all credibility that he has build over the past five years.

Sad thing is that he wasn't some junta appointed yahoo, he was the best and the brightest, and he didn't cut it. From the news reports it appears that the mistake was obvious, should he cared to listen to anybody. I don't believe for a moment he had listned to any advisors, foreign or otherwise. People who smelled the trouble were probably not allowed to express an opinion either. On the day of the crash the BOT governor was on holiday, btw.

The damage is not so much in monetary terms as most of it will recover in the coming days, the damage is in credibility - they have shown that SET and Central Bank are run by total morons.

Wasn't it the biggest free fall of any stock exchange in recent history? What makes it extra special is that it was totally due to mismanagement and not any external shocks. It will be a case study in EVERY business school, a brand name, like Tom Yam Kung crisis.

The good thing is that some attitude reasdjustment will be made. Thailand isn't good enough to be up there, with the big boys, and should mind his place rather than dream about hubs and self-importance.

[wpcoe]

Do I understand correctly that the 30% rule still applies for cash transfers into Thaland for purchasing condos?

So, if you want to buy a US$70,000 condo, you need to transfer in US$100,000 in order to be able to "net" the US$70,000 you need. The "missing" $30,000 will be withheld for one year, presumably with no interest.

Is the trick then, to transfer in multiple blocks of cash each <US$20,000. Nice fundraiser for the banks with SWIFT and/or other related transfer fees.

Of course, my use of US$ in this post means "US$ equivalent in THB", so it applies equally to transfers of UKL, Euro, CAD, AUD, etc. An interesting offshoot is that holders of other currencies wishing to transfer them into Thailand, now have to factor in the US$-THB exchange rate. Why didn't they set the restriction at x number of THB, rather than a THB equivalent amount of US$?

[jinjok]

market sold off big time and then came back a bit - classic. surely does not negate the fundamentals for sell of in first place nor drop further.

wait till this smoke clears and the high season tourists are gone - all the fed up expats start pulling out. of course it will mean THEIR finanical loses but the trickle down will be huge (support for thai families, f/b industry writ large). housing will crash - which sounds like godsend for thais - but if you own one, it will be far from it. i have a thai friend has house selling about 7mill near airport has not been able to sell it for yrs...then what.

this can only be bad news and let us not forget:

govt is stagnant in reforms, even pulling back and anti investment/foreign expat & yet another constitutional crisis looms.

baht is strong and thailand has reserves - opposite the 1998 crises BUT .... it is a crisis of another sort in another way worse - the world has lost faith in your market and basically visiting your country - this cannot be good for anyone except wealthy thais to consolidate power/money.

[Johpa]

.... it is a crisis of another sort in another way worse - the world has lost faith in your market and basically visiting your country - this cannot be good for anyone except wealthy thais to consolidate power/money.

Wasn't that the point all along?

Do not think the elite in Bangkok is so naive or that they do not understand the FOREX markets or that they are ripe for manipulation by other players. Somebody knew exactly what they were doing and made one heck of a short term profit. Coups are not cheap.

[Rdrokit]

Wow, do they have an insiders trading law in Thailand? I wonder how many big wigs sold off stock just before the 30% announcement and then bought back when it hit bottom knowing that the 30% rule would be resended. As they say,"the rich get richer............"

[dr_Pat_Pong]

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?

Bank it in the US and send a credit/debit card to the family to access the funds.

[jumnien]

I agree with Dr. Pat Pong,

Our money brought over before at 38-41 / baht to the dollar appreciated considerably (up to 14% this year) as it sat in Thai bank accounts. This is unlikely to continue and in fact some baht weakening should occur as the govt. wants. Better to keep dollars in safer US investments until the baht weakens to acceptable levels. Of course, if the baht continues to strengthen, as it has all year until the capital controls were announced, we are all screwed!

[Jai Dee]

Market recovers, govt reels

But central bank chief says government's relaxation of capital-control measures may make it difficult to control baht surge

The Bank of Thailand yesterday said the abrupt reversal in its capital-control policy to exempt portfolio and foreign direct investment might make it harder to rein in the galloping baht.

"When brokers insisted they could separate money for stock investment from other inflows, we accepted the gesture to reduce impacts on the bourse. But we are still concerned about this point and we continue to monitor the baht," governor Tarisa Watanagase said.

The relaxation of Monday's measure subjecting capital inflows to a 30-per-cent deposit caused the baht to weaken more slowly than expected against the US dollar, but it was still less volatile and weaker than earlier, she said.

The baht opened at Bt35.89/92 and closed slightly up at Bt35.75/90.

Stock investors hailed the central bank's change of heart to spare the Stock Exchange of Thailand. Local investors, mostly, returned to the bourse, allowing the exchange to salvage most of the market capitalisation that went up in smoke on Tuesday.

The SET market cap rose Bt530 billion yesterday, after losing Bt820 billion on Tuesday. The SET index ended at 691.55 points, up 69.41 points or 11.16 per cent against the free-fall of 14.84 per cent the previous day.

Monday's blanket measure was rolled back in the evening on Tuesday due to panic selling on the bourse. While the measure had earlier required all foreigners to deposit 30 per cent of funds brought in, it was amended at the end of the day to allow free inflows to the stock market.

Yesterday, the central bank also allowed non-resident investors to open non-resident baht accounts specifically for stock investment. It also reinstated the requirement that the daily balance of non-resident baht accounts in general must not exceed Bt300 million.

The special accounts are expected to allow commercial banks to clarify which inflows are for stock investment.

Deputy Prime Minister Pridiyathorn Devakula, who also is in charge of the Finance Ministry, was satisfied with the rebound in the stock market.

"Now that the baht does not strengthen further and the market starts to recover, there should be no more measures," he said, admitting he had never thought that the capital-control rule would have such a dramatic impact.

As to who would be responsible for the damage, he said right now the market has mostly recovered and should fully recover soon. Small investors have also returned to the market and recouped losses. "Don't worry about them. They are great and some are making profits."

SET president Patareeya Benjaphol-chai said it would take a while but the exchange would reclaim all the lost market cap since the economy's strong fundamentals continued unchanged, drawing foreign investors back to Thailand.

"The Thai market's price-to-earnings ratio is 7.3 times, the lowest in Asia. Still, foreign investors are worried that there could be more measures," she said, noting that the Black Tuesday incident should encourage all parties to pay more attention to the possible effects of a measure on the capital market.

Tarisa gave assurances that the central bank would not bring in additional measures to curb baht fluctuations but would take a close look at the foreign-exchange market for a while. Anyway the yearend usually sees no big transactions. She also insisted that the central bank would not cut its policy interest rate to stabilise the baht because oil prices remain an inflation threat.

Amid calls for authorities to show responsibility for the damage from the misstep, Tarisa insisted that before introducing the drastic measure on Monday, the central bank discussed with Pridiyathorn about the details and evaluated the impacts on every market including the capital market. However, the central bank could not inform the Securities and Exchange Commission and the SET before it took action for fear of news leaks.

Pridiyathorn said that after trading closed on Tuesday, Tarisa called him from Chiang Mai and discussed a way out. "Actually, the discussion was to be called this morning [yesterday], but I said it'd be too late as we need a measure to take effect on December 20."

Tarisa then asked him to hold an urgent meeting with brokers, commercial banks, custodians, the SET and the SEC. He chaired the meeting and discussed with Tarisa all the ways through the discussion about finding an exit.

Tarisa said authorities were surprised that investors overreacted to the measure, particularly long-term investors, as the opportunity cost of the measure is only 1.5 per cent - based on a 5-per-cent annual interest rate - which is small compared to the average 20-per-cent return on investment.

"If we did nothing, the currency speculation would go on and the baht appreciation would not only harm exporters but also the country's reserves. We had to do what we could," she said. It was unfortunate that some foreign investors did not understand the measure due to bad communication.

Tarisa dismissed talk that ousted prime minister Thaksin Shinawatra was behind the baht speculation. Tarisa said no well-known politician attacked the baht directly but she couldn't say if anyone did it indirectly through nominees. There was also no inflow for tax payment in the Shin Corp deal as rumoured.

Pridiyathorn denied reports that some politicians were unloading stocks on Tuesday, further depressing the market.

"Over half of the sellers on the day were foreigners who were afraid of additional measures. When they sold, local funds followed suit to prevent losses. However, when the fear subsided, investors returned. There is nothing related to politics and right now no new money is flowing into the Kingdom," he said.

He categorically denied the report that he told the Cabinet at its Tuesday meeting about the politicians' united front to strike at the stock market.

He noted that foreign investors have regained their confidence in the country. During morning interviews with the Wall Street Journal and CNBC, he reiterated that the measure was enforced to stop baht speculation and it was working. Without it, the baht could rise above Bt34 and devastate the export sector.

Source: The Nation - 21 December 2006

[nikster]

Wow, do they have an insiders trading law in Thailand? I wonder how many big wigs sold off stock just before the 30% announcement and then bought back when it hit bottom knowing that the 30% rule would be resended. As they say,"the rich get richer............"

As a wise man once said: Never attribute to malice what can be adequately explained by incompetence.

As for conspiracy theories, I don't buy it. Hindsight is always 20/20 and we all could have made a killing - even us TV readers as we were tipped off beforehand about the 30% rule. We were the insiders.

[Jai Dee]

'Black Tuesday' also meant opportunities

About Bt820 billion in paper wealth disappeared on Black Tuesday and it is not surprising it was sarcastically portrayed as "Thailand's grand winter sale".

However, Black Tuesday created losers, winners and lost opportunities.

Chanjira Pinthongkum, a retail investor, said she snapped up shares when the SET index on Tuesday plummeted by 60-odd points.

"I anticipated share prices would be low when I bought them, but when the SET index sank even further I was shocked. I have never seen a fall like this in my life," she said.

The SET index on Tuesday tumbled almost 20 per cent at one point before recovering to close the day with a 14.84 per cent loss - the biggest single-day fall in the Thai stock market's history, prompted by the BOT's 30-per cent reserve withholding requirement.

The government later announced it would exclude investment in the stock market from the measure.

Chanjira said she was tempted to scoop up stocks because the fundamentals of listed companies remained unchanged, while the steep fall was ascribed to the central bank's measure.

"I think it was an opportunity to make a lucrative profit as share prices fell significantly. Today, I have been proved right. All the shares I bought yesterday rose significantly and I have already taken the profit because I think the risk still remains in the stock market. I don't know what will happen next," she said.

An unnamed retail investor said he bought shares in Kasikornbank, Erawan Group, and Home Product Centre.

"I bought shares even though I didn't know whether the authorities would exclude the stock market from the central bank's tough measure, but I snapped them up them because I thought the prices were very cheap. I will cut my losses if the share prices fall by 20 per cent," he said.

He pointed out that he was a long-term investor who always holds shares not less than two to three months, but he is likely to look for profit-taking by selling shares bought on Black Tuesday soon.

"I'm not sure if the stock market will fall sharply again," he commented.

Black Tuesday was not only an unhappy day for direct stock investors but also for those who invest indirectly through Retirement Mutual Funds (RMF) and Long-term Equity Funds (LTF).

Take Ayudhya Fund Management as an example. There were around Bt100 million and Bt40 million worth of orders to buy LTFs and RMFs, respectively, yesterday, compared with around Bt30 million-Bt50 million per day for LTFs and Bt10 million-Bt20 million per day for RMFs ahead of Black Tuesday.

"Selling was not an option yesterday," said a retail investor who chose to remain anonymous. "I didn't think about how deep the index was going to dive. I thought early in the morning about buying some stocks but I had only a very small amount of money, so I couldn't buy much. I believe in the potential growth of the stocks I bought. So, in the short term the price may fluctuate. In the long term, I believe the prices I bought today are low enough to generate some profit."

Another retail investor said she regretted not buying any shares on Tuesday. "Since I have been investing in the stock market for 10 years, I had not seen a sharp fall like this before. I believe the stock market always rebounds after a steep decline," she said.

She did not buy shares on Tuesday as she wanted to assess the situation for a while.

"If the central bank does not revise the measure, the stock market will nosedive further. However, after I listened to Finance Minister MR Pridiyathorn Devakula's announcement, I knew at that moment that the stock market would certainly jump," she said.

Source: The Nation - 21 December 2006

[taxexile]

We had to do what we could," she said. It was unfortunate that some foreign investors did not understand the measure due to bad communication.

....as always , it seems to be the foriegners fault for misunderstanding the mangled and contradictory messages so beloved of thai officialdom.

[Jai Dee]

Equity funds lose billions of baht

Mark-to-market decline over two days greater than the decrease in SET Index

Badly hit by Tuesday's 14.84-per-cent fall in the stock market, equity funds, especially those which have an investment strategy linked to the SET Index, have suffered losses in value worth billions of baht, according to the mark-to-market value yesterday.

Following a comparison by The Nation on the Net Asset Values (NAV) on Monday and Tuesday, surveying 12 asset management firms and 80 equity funds including Long Term Equity Fund (LTF) and Retirement Mutual Fund (RMF), the NAV of 61 funds dropped more than the decline of the SET Index, facing an average book loss of around 18-20 per cent in a single day.

The country's biggest index-fund operator, TMB Asset Management, which manages seven index funds, faced an almost Bt1-billion loss in value.

The NAV of its SET50 fund declined to Bt27.07 on Tuesday, compared to the earlier Bt32.12. Its in-house index fund had a similar fate, dropping 19 per cent from Bt13.06 to Bt10.98.

Nasu Chansom, head of equity-fund management at Ayudhya Fund Management, accepted that his company's entire portfolio faced around Bt2 billion in book losses. All its equity funds experienced an 11-13 per cent drop against the 14.84 per cent dive of the SET Index.

According to Aberdeen Asset Management's deputy CEO Robert Samuel Penaloza, the firm's equity funds dropped between 6 and 11.8 per cent. Its small-capital fund survived Black Tuesday by facing only a 6-per-cent loss in value.

However, yesterday millions of baht flew into the industry due to the buying force of Long Term Equity Fund and Retire-ment Mutual Fund.

Kampol Jantavibool, TMB assistant to the director of the investment department, said the drastic change followed the movement of the SET Index. The company wasn't in a panic to sell, but on the other hand bought some stocks according to LTF and RMF purchasing orders.

The country's fourth largest mutual fund TMBAM, which usually receives around Bt20 million worth of LTF and Bt5 million to Bt10 million worth of RMF purchase orders per day during the last month of the year, yesterday obtained Bt66.4 million inflow to LTF and Bt54.1 million to RMF.

Kasikorn Asset Management, the country's largest mutual-fund operator, yesterday received Bt130 million for LTF and Bt150 million in RMF.

MFC Asset Management, the country's third-largest mutual-fund firm, yesterday received Bt6.9 million for LTF and Bt3.5 million for RMF. Its usual inflow for these two funds is less than Bt1 million per day.

Aberdeen Asset Management yesterday received Bt82 million for LTF and Bt17 million for RMF. According to Penaloza, the figure was double that for a regular day.

Meanwhile, Bond Electronic Exchange's chief executive Santi Kiranand said that the trading volume in November rose from the regular Bt17 billion to Bt18 billion, up to Bt30 billion.

However, he said that speculation could not be claimed as the main reason because during the past few months, the trend of interest rates had started to decline.

Source: The Nation - 21 December 2006

[Bottlerocket]

No.210/2006

December 20, 2006

Thai bourse confident in central bank’s rule relaxation

The Stock Exchange of Thailand (SET)’s Board of Governors met today to consider the effects of the Bank of Thailand (BOT)’s regulation to curb speculation in the baht. The regulation, which initially required financial institutions to withhold 30% of foreign currencies bought or exchanged against Thai baht, adversely affected the stock market on December 19. However, the rule has today been relaxed by excluding foreign inflows intended for direct investment and the stock market. This should allay foreign investors’ concern and support the market, SET President Ms. Patareeya Benjapolchai said. “The SET board noted that Thai investors displayed confidence in the economic fundamentals, as the net sale of about THB 25 billion by foreign investors was balanced by the net purchase of THB 28 billion by local investors. Furthermore, the circuit breaker system, which halts trading in unusual circumstances, functioned well and efficiently,” Ms. Patareeya stated. The board also acknowledged the cooperation of organizations such as Securities and Exchange Commission, SET and securities companies in compiling a forceful case demonstrating negative market consequences and influencing the policy review, which will now benefit the whole capital market. Ms. Patareeya also reported to the board that yesterday SET and securities companies had considered separating foreign investors’ accounts and capital from local ones, so BOT can identify external capital inflows. SET, commercial banks and securities firms have indicated to BOT that the separation will apply to non-residents and will be reported weekly to the Bank. Securities firms will specifically identify inflow accounts investing in equity, derivatives and in initial public offerings, and will liaise with relevant organizations. “It is believed that exempting stock market inflows from the 30% capital withholding regulation will regain investors’ trust. It is important that they maintain confidence in the Thailand’s economic fundamentals, and in a stock market which is offering attractive returns,” Ms. Patareeya added. The SET Index closed at 622.14, down 108.41 or 14.84% yesterday. Total trading value amounted to THB 72,132 million (approx. USD 2,003.67 million). Total market capitalization as of Dec. 19 was THB 4.6 trillion (approx. USD 127.78 billion), decreasing about THB 800 billion or 15% from THB 5.4 trillion on the previous day. The Market for Alternative Investment (mai) closed at 177.79, down 20.99 or 10.56%, with total trading value of THB 267.71 million. Foreign investors were net sellers at THB 25,124.97 million, while local retail investors were net buyers at THB 28,029.89 million. On December 19 the “circuit breaker” system halted trading on SET and mai for 30 minutes as the SET Index plunged to 656.49 points, which was 74.06 points or more than 10% down on the previous day’s close.

For more information, please contact the Corporate Communications Dept.: Ladawan Kantawong Tel: 0-2229-2036 / Kulvida Jintakawong Tel: 0-2229-2037 / Nattaporn Boonprapa Tel: 0-2229-2049 / Watsamon Saowakhonsathien Tel: 0-2229-2797

[Jai Dee]

SET continued to fall this morning

The Stock of Thailand (SET) Index this morning (Dec 21) plunged more than 20 points but rebounded a little.

At 10:04 hours, the index again plummeted to 671.40 points, or by about 20 points, but was able to recover slightly.

At 10:17 hours, the index went down 14.01 points to stay at 677.54 points, or down by 2.03 percent.

Source: Thai National News Bureau Public Relations Department - 21 December 2006

[Jai Dee]

PM convinced of the curb implemented by BOT

Prime Minister Surayud Chulanont reckoned that the central bank’s measures to curb short-term speculation of Thai baht were appropriate.

Even though the curb caused the Stock Exchange of Thailand (SET) Index to plunge over 108 points on December 19th, the Prime Minister believed the intervention was rightly done, but noted that the policy may be a little too stern.

The Bank of Thailand executives and Deputy Prime Minister and Finance Minister Pridiyathorn Devakula are now trying to stabilize the Thai currency. Gen. Surayud nonetheless is confident that the overall economy of Thailand will not be affected.

Source: Thai National News Bureau Public Relations Department - 21 December 2006

[Jai Dee]

Thai Baht Drops Most in 7 Years as Overseas Funds Dump Shares

Dec. 21 (Bloomberg) -- The Thai baht tumbled by the most in more than seven years as international investors sold shares on waning confidence in the country's monetary policy after the government reversed some currency controls. Stocks dropped.

The currency has sunk almost 4 percent since Dec. 18, when the central bank imposed penalties on overseas investors who take out money in less than a year. A day later the rule on stock investments was canceled after the SET index collapsed 16 percent. Thailand is seeking to stem gains in Asia-Pacific's best- performing currency this year to aid exporters and boost growth.

"We're hearing a lot of hedge funds are exiting Thailand,'' said Chee Chen Poh, a currency trader at BNP Paribas in Singapore. "There's been a lot of blood spilt in the market as the mood isn't good for Thailand. There's a big drop in the baht and stocks are still going down.''

The baht slumped 1.9 percent to 36.46 per dollar as of 11:15 a.m. in Bangkok, the weakest since Nov. 24, reducing gains on the year to 12 percent. The loss is the most since Sept. 23, 1999.

"We don't have a target for the baht, our concern is more about the volatility,'' Thai Central Bank Governor Tarisa Watanagase said in an interview. "This is temporary.'' The measures will be lifted once volatility eases, she added.

Pull Out Funds

The curbs on short-term investment may trigger overseas investors to pull out funds already in the nation and has hurt the central bank's reputation, said Standard & Poor's Ratings Services credit analyst Kim Eng Tan in an e-mailed statement.

Global investors sold $79 million of shares yesterday, the second-most since June. They dumped $699 million the day before, the most since at least Jan. 4, 1999, wiping out $23 billion of market value. Stocks dropped as much as 2.9 percent today.

Investors fleeing Thailand threaten its recovery after the military ousted Prime Minister Thaksin Shinawatra on Sept. 19, pushing the baht down 1.4 percent. Thailand's export growth may slow to between 10 percent and 12 percent next year from 16 percent this year, due to slowing global economic expansion and the stronger baht, the Commerce Ministry said Dec. 7.

"The baht can still weaken some more,'' said Catherine Tan, head of emerging markets at Forecast Ltd. in Singapore. "Funds are still shooting out of Thailand as they've lost confidence in the central bank and don't know what's going to happen next.'' It may drop to 37 today, she said.

The Bank of Thailand also may be selling the currency to weaken it, said Shahab Jalinoos, head of Asian currency strategy at ABN Amro Bank NV in Singapore. After reversing the stock rule late Dec. 19, shares yesterday surged 11 percent and the baht gained 0.3 percent.

"A weaker baht is the only way the central bank can justify its actions this week,'' Jalinoos wrote in a note to clients.

`Constructive on Thailand'

Some analysts, including Rob Subbaraman, a senior economist at Lehman Brothers Holdings Inc. in Hong Kong, say the baht's slump will be temporary, as the economy is set to expand next year, bringing back investors.

"The restrictions initially spooked investors, but the central bank has now relaxed some of those,'' said Subbaraman. "We're still constructive on Thailand as the fundamentals are still good for next year. There will be loopholes to get around some of these controls too.''

Subbaraman forecasts the baht rising to 35 per dollar by the end of 2007 on growth of 5 percent. The government on Dec. 4 also raised its growth forecast to 5 percent next year, from an earlier estimate of as much as 4.7 percent.

`A Nightmare'

The Bank of Thailand's decision to introduce currency controls on foreign funds "complied with the government's policies'' to stem the baht's rise, Prime Minister Surayud Chulanont told reporters in Bangkok today. The reversal of the rule on stock investments helped "limit the damage'' by bolstering the stock market yesterday, Surayud said.

Thai Finance Minister Pridiyathorn Devakula yesterday said the regulations had been "very successful'' in curbing speculation against the baht.

"We achieved the main target of preventing the baht from strengthening beyond 35 baht to the dollar, which would be a nightmare for the export sector,'' Pridiyathorn said. The baht climbed as high as 35.08 on Dec. 18, the strongest in nine years. It's now trading about 3.5 percent lower than the 35 level.

Source: Bloomberg - 21 December 2006

[jumnien]

Happy days are here again, 36.46 and getting better...

[Jai Dee]

Thai baht falls versus dollar, sentiment weak

SINGAPORE, Dec 21 (Reuters) - The Thai baht weakened against the dollar on Thursday as investors continued to dump the currency following this week's turmoil over measures to curb baht strength.

The baht came under heavy selling pressure in overnight trade and dealers said a return of some liquidity to the market was seen as an opportunity to reverse long positions on the Thai currency.

A trader in Singapore said the baht was quoted as low as 36.51 per dollar <THB=> overnight, taking it to its weakest level in about a month.

In early Thursday trade, the baht traded at about 36.10 to the dollar, down almost 3 percent from a 9- year high of about 35.06 hit on Monday.

Thai shares bounced back on Wednesday from their biggest sell-off in 16 years after the government back-pedalled on currency controls, but the abrupt policy U-turn has shattered confidence in its economic chiefs.

"The stock market did recover yesterday but it is still not a full recovery and investor confidence is low," said a Bangkok trader.

"Traders are continuing to unwind their positions and today the baht should be a little weaker, although losses should be capped at around 36.40."

Traders said some foreign banks continued to not quote the baht for offshore trade amid uncertainty in local markets.

Source: Reuters - 21 December 2006

[jumnien]

....the skies are blue, it's clear again - 36.51 and getting better!

[The Coder]

When I read the below CNN story, it raised questions in my mind that the snap back might just be a dead cat bounce...

Asia markets rebound, but Thai credibility hurt

Abrupt policy shift undermines investor faith in Thailand's new government.

December 20 2006: 7:05 AM EST

BANGKOK (Reuters) -- Thai shares bounced back on Wednesday from their biggest sell-off in 16 years after the government back-pedaled on currency controls, but the abrupt policy U-turn shattered confidence in its economic chiefs.

The stock market, which plunged 14.8 percent on Tuesday - its biggest one-day drop since Iraq invaded Kuwait in 1990 - ended 11.2 percent higher after the army-appointed government exempted stock buying from controls on short-term currency inflows just a day after imposing them.

Elsewhere in Asia, Hong Kong's Hang Seng gained 1.45 percent and the HSCC Red Chip fell 1.76 percent. Japan's Nikkei 225 gained 1.40 percent, while China's Shanghai Composite gained 0.38 percent.

The stunning about-face in Thailand in the wake of a foreigner-led rout that knocked $23 billion off Asia's worst-performing bourse this year rekindled memories of the 1997/98 Asian financial crisis and brought howls of derision from analysts.

"The one thing worse than an incompetent central bank is an incompetent central bank that flip-flops," said Bratin Sanyal, head of Asian equity investments at ING in Hong Kong.

Domestic investors were equally scathing in their criticism of the technocrats appointed by the military leaders who ousted Prime Minister Thaksin Shinawatra in a Sept. 19 coup.

"I'm stunned. They are truly incapable. Please, get the hel_l out," said 35-year-old businessman Chan Pornpipatkul.

The rally, spearheaded by big-cap stocks such as oil-and-gas firm PTT PCL and Bangkok Bank - owned in part by the foreigners who stampeded for the exit on Tuesday - was the market's biggest one-day jump since February 1998.

But most of the buyers were Thai, as international investors continued their retreat, selling a net $81 million of shares to go with the $700 million they dumped on Tuesday.

"Investor hel_l"

Despite its recovery, the index was still 5 percent lower than when the Bank of Thailand (BoT) announced on Monday a drastic assault on the speculators it blamed for catapulting the currency 16 percent higher in 2006 against the dollar.

The International Monetary Fund (IMF), describing the baht measures as "too strong and far-reaching," welcomed the decision late on Tuesday to lift the restrictions for equity investments.

But by then Thailand's reputation in the eyes of international investors was in tatters.

IDEAglobal headlined a research note "Tourists' haven, investors' hel_l," as analysts poured scorn on Finance Minister Pridiyathorn Devakula and his successor as central bank chief, Tarisa Watanagase, both appointed after the coup.

"They are proving themselves to be very unprofessional. Their actions are very irresponsible. They have totally lost credibility," said Catherine Tan, head of Asia Emerging Markets at Forecast in Singapore.

"I don't see foreigners returning to Thailand any time in the near future. Markets now have no confidence in the government."

Tarisa, appointed just two months ago, agreed with her former boss that equity investments should have been exempted from the rules and admitted that the sell-off had taken them by surprise.

"We had to reverse the measures as the market reacted more than we expected," she told reporters.

ABN AMRO cut its investment rating on Thailand to "underweight" and questioned how the economy was being run in the aftermath of the coup, Thailand's 18th in 74 years.

"Policy decision-making seems to be at odds with the workings of capital markets," the investment bank said.

Intervention questioned

The sell-off sparked brief fears of a repeat of the 1997/98 Asian financial crisis, triggered by a baht devaluation, and prompted falls in stock markets in the region, though they also recovered on Wednesday.

Bond yields were largely steady in Thailand's secondary market on Wednesday, with those on the long end falling slightly after central bank intervention, dealers said. Yields had jumped 20-40 basis points across the board on Tuesday.

"Why did they intervene in the bond market today? They should have known bond markets would fall after the baht measure," Forecast's Tan said.

The baht, the strongest Asian currency against the dollar this year, was trading around 35.8 per dollar, a decline of around 2 percent from Monday's 9-1/2-year high that triggered the BoT's leap to the defense of exporters.

The curbs were designed to rein in the baht's rise by forcing speculators to keep their money in the country for at least a year or face a hefty 10 percent penalty.

Trade-related deals and repatriation of funds by Thai residents were excluded. Pridiyathorn added equity-related transactions to the exclusions late on Tuesday.

Exporters had welcomed the curbs because a rising baht makes their goods less competitive on world markets and could reduce earnings repatriated from overseas.

[madi]

Baht above 40 again soon?

[DFCarlson]

Baht above 40 again soon?

Not soon enough! Hope you're right.

[Jai Dee]

Thai controls could trigger funds pullout: Standard and Poor's

Thailand's capital controls achieved their aim of turning away speculative inflows but could trigger a pullout of funds already in the kingdom, US credit ratings agency Standard and Poor's said Thursday.

The control measures took effect Tuesday after the Thai baht hit a nine-year high of 35.12 to the US dollar.

They required financial institutions to withhold 30 percent of most incoming foreign funds, effectively impounding short-term foreign capital for a year.

In reaction, the Thai bourse plunged 15 percent which sparked an abrupt policy U-turn by the country's army-installed government.

The currency rules would no longer apply to stock market investment, it said.

"While these actions have succeeded in stemming further speculative inflows, they could also trigger a pullout of foreign funds already invested in the kingdom. Moreover, they have spawned tighter domestic financing conditions, harmed the Bank of Thailand's reputation, and made investors wary," S and P credit analyst Kim Eng Tan wrote in the report.

The Thai currency was quoted at 36.43-48 to the US dollar in early Thursday dealings.

S and P said the Bank of Thailand's monetary options were limited in trying to curb the seven percent appreciation in the baht which occurred since the September 19 coup against elected Prime Minister Thaksin Shinawatra.

"The increasing cost of foreign exchange interventions, however, ruled out the continued use of this instrument to stem the Thai baht's ascent," S and P said.

"Lowering the interest rate to ease such losses was also not an easy option."

Initial controls imposed on December 4 and a warning of possible further measures "either went unnoticed or was ignored by investors", and led to Monday's surprise restrictions, the report said.

Volatility triggered across Asian financial markets by Thailand's controls should subside in the near term if there are no more significant negative shocks, S and P said.

"The healthier external balance sheets of both Asian central banks and corporations also make the recurrence of a 1997-type financial crisis unlikely," the agency said.

That crisis began in Thailand when excessive borrowings in US dollars coupled with high interest rates forced the Thai government to float the currency.

The baht then promptly collapsed along with the economy, and the contagion spread across the region.

Source: ChannelNewsAsia - 21 December 2006