Baht, stock market to retreat due to capital curbs, holidays

BANGKOK: -- Worries over new reserve measures on local banks aimed at curbing short-term capital inflows coupled with the upcoming holidays, are likely to depress both the Thai baht and the stock market next week, according to a report issued by Kasikorn Research Centre.

The report said the baht -- which slipped to Bt36.41 against the dollar late Friday -- is expected to move within Bt36.20-Bt37.00 per dollar next week due to various factors.

These factors include reserves to be made by commercial banks in anticipation of large withdrawals by customers ahead of New Year while investors are still concerned about the direction of Thai currency and overseas banks closed because of the Christmas and New Year celebrations.

Late Monday (Dcember 18), the Bank of Thailand (BoT) shocked both the currency and equity markets with its announcement that foreign inflows would be subject to a 30 per cent reserve requirement.

But Pridiyathorn Devakula, deputy prime minister and finance minister, clarified Tuesday night that the order would not be applied to foreign direct investment (FDI) and equity investments after the Stock Exchange of Thailand (SET) composite index tumbled 14.84 per cent and over Bt800 billion in value was wiped out in the market's largest one-day loss since the SET established 31 years ago.

The SET composite index, closed at 680.31 points on Friday, down 7.6 per cent from a week ago, is expected to continue retreating next week due to persisting worry about the central bank's new measures. The BoT is scheduled to announce key economic data for November next Friday.

Most investors will be absent from the market due to the year-end holidays.

-- TNA 2006-12-23

Most investors will be absent from the market due to the year-end holidays.

The only really relevant information in this pronouncement. :D