Thread: Stock market loses Bt500 billion in value : SEC

Stock market loses Bt500 billion in value : SEC

Thirachai Phuvanatnaranubala, secretary general of the Securities and Exchange Commission, said that the Bank of Thailand's new measure has reduced the SET's market capitalisation by as large as Bt500 billion.



He said foreign investors are concerning that the central bank may introduce more measures. However, he warned them to wait and consider well the consequence before shifting their capital out of the country. Otherwise, they may lose investment opportunity.

Teerana Bhongmakapat, an economist at Chulalongkorn University, urged the central bank to cut reserve requirement of 30 per cent on capital inflows to around 3 to 5 per cent to lessen the drastic measure.

If investors pull back their money within three or six months, they would lose the reserves. If they get money back within a year, they would get half of the reserves, he said.

He said the 30 per cent reserve was too severe and it could adversely impact on both shortterm and longterm capital flow.

He, however, said the central bank move in the right direction as it has try to introduce prudential management of macroeconomy which is under threat from shortterm capital flows.

"The challenge is how the central bank could minimise the cost , the side affect coming along with central bank's goal to curb rising baht," he added.

At 12.12 pm, the SET index fell further by 13.74 per cent or 100.37 points to 630.18.

Key Democrat Party member Korn Chatikavanij urged the Bank of Thailand to immediately reverse the recentlyintroduced measure to intervene the currency, saying that it would cause the damages to the capital market for years. Today, Thai share prices plunged by 10 per cent at 11:30 am after the central bank took the most stringent measures since the 1997 Asian financial crisis to curb the baht's rise.

The Stock Exchange of Thailand implemented the circuit breaker measure for the first time in history to deal with the drop by suspending the trading for 30 minutes at 11:30 hours.

At 11:30, the SET nosedived to 656.49, the lowest point of the day so far. The Stock Exchange of Thailand (SET) composite index nosedived 64.62 points or 8.85 per cent to 665.93 in the first minutes of trading and the bluechip SET 50 index fell 53.10 points to 458.90.

Korn said: "The measure causes the damage to the capital market. The Bank of Thailand should immediately reverse this policy, because no investors who will want to spend Bt100 just to have Bt30 withheld. And if they will get only Bt90 if they want to remit the money in less than one year."

Starting from Tuesday, financial institutions would be required to withhold 30 per cent of foreign currencies bought or exchanged against the baht, except those related to exports, said BOT governor Tarisa Watanagase.

Korn said that the damage caused by the measures could be overwhelming. Besides, there's rule from the financial institutions that they cannot invest in countries with capital control. He said the capital market in Chile for instance was damaged by 10 years while Malaysia was damaged by 3 to 4 years.

He said Bank of Thailand should implement the separate measures to deal with money and financial capital markets. Speculators are mostly in the bond markets. Bank of Thailand should separate the measurement in money and capital markets speculators are mostly bond market.
The Nation

damn I was going to post this one

Nothing to see, move on

it's only temporary

For us people who have no idea what all this means will the US Dollar gain on the Baht anytime soon?

hopefully yes !!!

but the bad news, overseas banks have stopped converting THB because they have no idea what the BoT did. Basically the news is too vague, and as usual, the BoT didn't think before taking actions about those technical details and everyone is in a panic over the lack of information.

some banks in Singapore have stopped converting THB in light of these vague measures

The magic words - 1997 - spring to mind. Retards.

Update: Govt firm as markets panic

NOTE (See earlier story in Bangkok Post Business section, at left)

More information, background in Top Stories:
Bangkok Post: Top Stories

(By BangkokPost.com Agencies)

The Thai government will not reconsider draconian measures introduced to halt the baht's rise, the finance minister said today, as local stocks plummetted to record losses and markets in the region dropped percipitously.

"The government will not reconsider the policy; let the market take course and it will adjust itself," said Pridiyathorn Devakula, who is also the deputy prime minister. He said the measure introduced by the central bank yesterday would only affect brokers and short-term currency speculators.

Meanwhile, Dow Jones reported that a senior credit analyst at Standard and Poor's Ratings Services predicted that Thailand's imposition of capital controls to curb the appreciation of the baht will have no immediate impact on the country's credit ratings. He said the new measures will have long-term economic costs.

Thai stocks took their greatest plunge in at least 19 years, triggering declines across Asia, after the central bank said international investors must pay a 10 per cent penalty unless they keep funds in the country for a year.

Thai stocks plunged nearly 17 per cent on Tuesday - more than 120 points - as foreign investors took fright at moves to curb currency speculation.

The drastic fall in share prices on Thailand's main bourse index came after the authorities, worried the strength of the baht currency would hurt exporters, said on Monday they were slapping controls on short-term speculative inflows.

In response, the baht fell around 2 percent from a 9-year high on Monday and regional stocks were also hit, with MSCI's index of Asian emerging markets down around 1.6 percent at 12:45 p.m. as foreign money pulled back.

The Stock Exchange of Thailand (SET) fell 100 points - nearly 14 per cent - after new Bank of Thailand regulations aimed at curtailing baht speculation triggered panic selling by foreign investors.

The morning trading session saw panic from investors following the announcement Monday night of the new measures by the Bank of Thailand, said Mongkol Phuanpatra with Adkinson Securities said.

"Investors lost confidence, and they are confused about the measures," he said.

"There is a lot of money already in the Thai markets. If they are pulling out, we are dead," a dealer at a domestic brokerage said. "I'm not sure if we're going to get a bonus this year."

Adding to the problem, the yen edged up as traders looked for a signal that Japanese interest rate will rise early next year.

The Bank of Japan, as expected, held interest rates in world's second largest economy steady at 0.25 percent,

Japanese government bonds rose after the BOJ kept rates steady in a unanimous decision at its policy meeting.

March 10-year JGB futures rose 0.39 point to 134.47. The benchmark 10-year JGB yield slid 3.5 basis points to 1.645 percent

Tokyo's Nikkei fell 1.1 percent, as accounting problems

xxxxxx

Previous story:

The Thai baht dropped by the most in three years after regulators yesterday required banks to lock up 30 per cent of new foreign currency deposits for a year to curb speculation.

The baht was not quoted by several foreign banks in offshore trade on Tuesday.

The Stock of Exchange of Thailand dropped like a rock in morning trading. The SET Index was down 86 points, or almost 12 per cent.

The market automatically shut down for 30 minutes on the so-called "circuit breaker," which halts all trades when the market rises or falls 10 per cent or more in a single session.

Regional stock markets were hit by a Thailand knock-on.

Singapore share prices ended the morning session 1.1 percent lower, with Thai-linked stocks helping to pull the market down. Malaysian share prices closed the morning session sharply lower.

"It's the contagion effect of the capital controls imposed by the Thai government" chief economist of Singapore's RAM Consultancy Services, Yeah Kim Leng told the AFP news agency. "It has affected (regional) foreign investor sentiment and confidence ...

"It's a knock-on effect," he said.

Bloomberg news agency quoted Claudio Piron, head of Asian currency research at JPMorgan Chase Bank in Singapore: "The initial reaction from investors is they're fairly negative. This could spook the markets and capital may take flight. The baht could drop further."

Dealers said there was confusion in the market over the impact of the latest plans and this had led some foreign banks to not quote the currency in the offshore market for now.

"We are quoting the baht only onshore. We don't want to quote it to the offshore market until it is clear what is going on," a dealer at a foreign bank in Bangkok told Reuters news agency.

The baht traded in Bangkok this morning at around 35.80 per US dollars at Bangkok banks. But the exchange rate on the international currency market in New York saw the baht strengthen marginally this morning Thailand time - from 35.98 per dollar early this morning, to 35.90 at noon today, Thailand time.

Starting today, overseas investors buying baht will only be able to invest 70 per cent of what they transfer and only recoup all of their funds if they keep the money in Thailand for more than a year. Those who withdraw in less than 12 months will be penalised 33 per cent of that 30 per cent portion.

Originally Posted by watterinja

The magic words - 1997 - spring to mind. Retards.

yes but this time it's because it's too high

BOT to maintain baht measure, but to try to reduce effects

Nitaya Pibulratanagit, the central bank's assistant governor, said Tuesday the Bank of Thailand is seeking for ways to reduce the effects of the 30percent withholding requirement on other markets.

However, the central bank does not plan to remove the measure entirely.

Nitaya admitted after her meeting with brokerage companies and fund managers that the stock prices had fallen deeper than expected.

"After listening to (brokers), we must introduce measures to soften the rules quickly, but I can't say when we will do that," she said.

The Nation

I agree, the last thing we need is a strong THB, so it's a good measure in some way, but they need to be more clear on the transfer purposes.

S&P analysts backs baht mesures

The measures of the central bank to curb its currency appreciation won't have an immediate impact on the country's credit ratings, but the new measures will have long-term economic costs, a senior credit analyst at Standard and Poor's Ratings Services told Down Jones Tuesday.

The measures 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 Tuesday. "Definitely, it will work, but it carries long-term costs which have to be balanced with short-term benefits."

The Nation

Damn, I wanted to sell all my portfolio yesterday and make another 25% profit on the currency exchange

Too late, I guess

BBC NEWS | Business | Thai stocks down after bank move

Foreign investors may have gained about 20 per cent

A Thai broker said foreign investors in the Stock of Exchange of Thailand might have gained about 20 per cent profits from unloading their shares Tuesday morning.

Ekpitthaya Iamkhong-ek, vice president of Bangkok First Investment and Trust, said most foreign investors came in to invest in SET when baht was still about Bt42 per US dollar and now the baht had appreciated by 15 to 20 per cent.

As a result, the investors would earn profit from the baht appreciation plus profits from the stock gains.

Source: The Nation - 19 December 2006

Originally Posted by Butterfly

Originally Posted by watterinja

The magic words - 1997 - spring to mind. Retards.

yes but this time it's because it's too high

I'm thinking more about sudden moves which bring on a chain reaction, leading to a domino effect. Hopefully the other Asean players will hold the fort reasonably steady - looks like Japan is trying this.

Thailand look like total greenhorns in all of this - yet again. Sudden, drastic moves are never wise - especially in a volatile, speculative industry - & not long after a coup.

I doubt that Thailand can salvage much international credibility after the second such irrational response in less than 10 years.

so Butt should we hang on to our Baht or ... or ... or ... hrmm run out and buy ... hrmm ... hrmm ... hrmm *scratches balding head and farts*

^^ not only that, but they created cahos by not disclosing it clearly. We have a surprise effect combined with an "unclear" effect here. Basically nobody knows anything, not even the BoT

KL down 2% today

Originally Posted by in4zip

so Butt should we hang on to our Baht or ... or ... or ... hrmm run out and buy ... hrmm ... hrmm ... hrmm *scratches balding head and farts*

Well you could try to buy USD if you find a bank outside Thailand that can do it

Tomorrow is going to be more interesting though

Originally Posted by Butterfly

Tomorrow is going to be more interesting though

What do you envisage happening tomorrow?

^
Shit + Hit + Fan

Most of my clients are asking if this was a typo and the real amount should be 3%

so the story so far.......the foriegn investors cut and ran before 3pm and the market is now 500 billion baht down.
Can someone show me the benefits of this move by the BOT or am I totally missing the brilliance of this action by them

^well, the Baht is up around 2-3%, so Xmas dinner is going be a little cheaper for all the tourists in Fuket on Monday - and we all know how the powers to be want keep the tourists happy

Originally Posted by William

^
Shit + Hit + Fan

Most of my clients are asking if this was a typo and the real amount should be 3%

Guess tomorrow will be raincoat & goggles day

Originally Posted by William

Shit + Hit + Fan

well we'll see. Time to buy bargains, unfortunately some of my holdings didn't go down that much, so I can't buy more of them at a bargain. Damn !!! Mostly the big caps got affected. The small caps are still holding.

Definitely a buyer market for blue chip bargains. But I would still wait after tomorrow before buying anything. Tomorrow will be key.

Foreign house buyer affected by baht measure

Impacts of the Bank of Thailand's austere capital control measure spreads beyond the stock market, as an expatriate sees a problem in settling a house purchase deal scheduled Wednesday.

The expat who contacted The Nation but asked not to be named transferred 150,000 euro from a bank in Hong Kong to Kasikornbank Tuesday, without knowing of the measure.

He was shocked to know that 30 per cent of his money would be parked with Kasikornbank once he converted the foreign currency into Thai baht.

"Only if the central bank averts the policy, would I have enough money to sign the contract. If this policy remains, I would need 30 per cent more for the house that I have reserved," he said.

The Nation

Good news, it's lifted for Stock Market investment !!!

But the credibility of the country took a serious hit. What a big mistake.

BLACK TUESDAY ANALYSIS
Pridiyathorn's big gamble

MR Pridiyathorn Devakula, a deputy prime minister and the finance minister, and the banking authorities have made a big mistake by introducing wholesale capital controls instead of selective controls on the money market to stem the baht speculation.

The result of this is the collapse of the Thai stock market. More than Bt800 billion in wealth was wiped from the stock market on Black Tuesday alone amid panic selling unseen in the Thai history.


However, Pridiyathorn moved quickly to repair the huge damage by announcing yesterday that the authorities would exempt capital controls on equity investment. Indeed, the banking authorities had not thought it through when they introduced wholesale capital controls without taking the equity market into account.

It is true that Thailand is facing economic trouble from the intense baht speculation. If unchecked, the baht could move up to Bt31Bt32 against the US dollar to bankrupt Thai exports, whose margins have been badly squeezed by the stronger baht. Since the beginning of this year, the baht has jumped from Bt41 to Bt35, the highest level in the region.

A former Bank of Thailand official said the banking authorities should have imposed selective controls on the money market to tackle the baht speculation at the source.

Foreign institutional investors and money managers have been pouring their investments into the baht bond market in order to make profits from the high interest rate of 6 per cent and the baht's upward trend.

Over the past three months, some Bt100 billion of foreign money has been flowing into Thailand to invest in the shortterm paper to speculate on the baht's rise. In December, some US$1 billion a day has been flowing into Thailand.

"If they wanted to quash speculation, they could have introduced the measures at the money market. But instead they have imposed capital controls on capital inflows without any discrimination," said the former Bank of Thailand official.

With the indiscriminate practices, foreign stock investors can only unload their investment portfolios. But that does not mean money is flowing out of Thailand like the 1997 financial crisis.

"Just wait and see, I don't think the baht will weaken like the banking authorities are hoping because money is not flowing out of the country. The foreign money, invested in stocks and bonds, is still locked in the country. Once the foreign investors have sold stocks, they go into the bond market instead of further speculation.

"If the maturity of the bonds expire, foreign investors will continue to roll over their investments. If the banking authorities are smart, they should have imposed the selective controls against the speculation in this money market," the former BOT official said.

Understandably, between the stock market and the export sector, Pridiyathorn would have to protect the export sector, which is the engine of Thai economic growth. But the stock market, which he intends to let go for the moment, also represents the wealth of the nation.

Broadly speaking, foreign money flowing into Thailand goes into foreign direct investment, the equity market and the money market (for example, baht bonds, nonresident accounts). The Bank of Thailand has introduced a shock therapy to ward off the baht speculation by requiring foreign investors to put 30 per cent of their total investment as a reserve requirement into a noninterest bearing account of the central bank.

If the investors take their money out within one year, they will only get 20 per cent of the amount while the remaining 10 per cent will go into the central bank's coffers.

Under this measure, foreign investors face a double jeopardy: they can only invest 70 per cent of their money brought into the country; and if they keep their money in Thailand for less than one year, they will be subject to 10 per cent withholding tax.

Korn Chatikavanij of the Democrat Party has called for the banking authorities to reverse the capital control measure before it is too late.

"The capital control measure will destroy the stock market," he said late yesterday.

"First, foreign investors will not bring in money to invest in Thai stocks if they can invest only 70 per cent of the total amount," Korn said.


"Second, some foreign institutional investors are obliged to sell Thai stocks because they have their own rule that they will not invest in a country with capital controls."

A source at a US investment banking house said: "This is what we call credibility damage. We never thought they would think in this short term and bureaucratic way. Already, foreign investors are concerned about the issues of nominees. Now it seems there is no direction in this country."

Stock investment to be exempted : Pridiyathorn

Finance Minister Pridiyathorn Devakula said Tuesday the central bank would exclude inflows into the stock market from the Bank of Thailand's drastic measure of 30 per cent reserve withholding requirement.

After an urgent meeting in the evening among Finance Ministry, Stock Exchange of Thailand, the Securities and Exchange Commission, and Bank of Thailand, the Thai authorities agreed that the earlier measure is too harsh.

Pridiyathorn said they agreed to exclude inflows for stock investment from the harsh measure.

He announced the review of the central bank measure at 7.45pm Tuesday.

Business Reporters

The Nation