Thailand stock market takes a nose dive (-20%)

Some announcement by the Central Bank and panic sets in, causing a drop of nearly 20% (as of now):

etna.mcot.net/query.php?nid=26673

abc.net.au/news/newsitems/20 … 815068.htm

Me thinks this is a good opportunity to buy in cheaply by end of the week with a long-term strategie. :sunglasses:

Thailand Stock Exchange

No, no, no! This time they’ve really gone and shot themselves in the foot.

The notices concern requiring a deposit when you buy Thai equiites - that means dead money. Thailand is the new pariah, and similar to the case in Malaysia, it will likely stay that way for a very long time.

Fortunately, they don’t have any more feet to shoot.

HG

Wow! They’ve still shot themselves in the foot credibility wise, but Rascal, you could be right! They’re at leat acknowledging the reality. Mind you they could reverse it and remove all credibility.

It’s not a bad each way punt. Risky as hell, mind.

HG

BLACK TUESDAY ANALYSIS
Pridiyathorn’s big gamble

nationmultimedia.com/2006/12 … 021986.php

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

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

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 the 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 at the money market to tackle with the baht speculation at source. The foreign institutional investors and money managers have been pouring their investment into the baht bond market in order to make profits from the high interest rate of 6 per cent as well as the upward trend of the baht.

Trading in the baht bond market has jumped sharply from Bt10 billion a day to around Bt50 billion a day. Over the past three months, some Bt100 billion of foreign money has been flowing into Thailand to invest in the shortterm paper to speculate the baht rise.

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

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

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

“If the maturity of the bonds expire, the 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 official of the Bank of Thailand said.

Yields of all maturity bonds yesterday rose 20 basis points across the board, according to the Thai Bond Market Association. The bond market has been blamed as the main source for the baht speculation.

“Although the trading volume was active, there’s no sign of capital outflow,” an official at Thai BMA said.

Understandably, between the stock market and the export sector, Pridiyathorn would have to protect the export sector, which is the engine of the 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 bond, nonresident accounts). The Bank of Thailand has introduced a shock therapy to ward off the baht speculation by requiring the foreign investors to put 30 per cent of their total investment as reserve requirement into the noninterest bearing account of the central bank. If the investors take their money out within one year, they will only get the 20 per cent amount while the remaining 10 per cent will go to the central bank’s coffers.

Under this measure, the foreign investors are to 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 also called for the banking authorities to reverse the capital controls measure before it is too late.

“The capital controls measure will destroy the stock market,” he said late Monday.

“First, the foreign investors would not take their money to invest in Thai stocks if they can invest only 70 per cent of the total amount they bring into the country,” Korn said.

“Second, some foreign institutional investors are obliged to sell Thai stocks because they have their own conditions that they would 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 that they would think in this short term and bureaucratic way. Already the foreign investors are concerned about the issues of nominees. Now it seems that there is no direction in this country.”

by Thanong Khanthong

The Nation

ttf and tf are both available on the US markets

The key issues concerning Thai equities have been overturned.

Insanity is about to prevail. No doubt there will be money to be made. . . if you’ve got the stomach for it!

Thai Stocks May Rebound as Government Scraps Currency Rules

By Michael Tsang

Dec. 20 (Bloomberg) – Thai stocks may rebound from the biggest slump in 16 years after the government scrapped day-old currency controls on international equity investors.

The Finance Ministry late yesterday in Bangkok reversed the Bank of Thailand’s move requiring banks to lock up 30 percent of new foreign-currency deposits for a year on funds earmarked for stocks. The restrictions sent Thailand’s SET Index tumbling 15 percent, wiping away $23 billion in market value and prompting declines in emerging markets globally.

HG

Damn, too late already. This morning it’s up by ~10% …

Makes you think the government just sold the country to the Germans eh?

True.

[quote]Thai stock market rebounded from its record-setting plunge of 15 percent on Tuesday. . .

Ms. Tarisa said the biggest problem on Monday was not the new regulations themselves, but rather a failure to let investors know enough about them. “There was not enough communication in English in terms of the details of the regulation,” she said.

The bank has been battling to contain a surge of short-term inward investment, particularly in Thai corporate bonds and commercial paper. It issued new restrictions on foreign investment in the bond market on Dec. 4, but the measures failed to have any impact.

The bank then decided to impose blanket limitations on all foreign investment, Ms. Tarisa said, because of the difficulty of determining the purpose of specific investment inflows. The central bank deliberately gave investors only one day of warning, in hopes of preventing them from dumping their Thai assets in anticipation of the new rules . . . .

The new rules, withdrawn today, required investors to set aside 30 percent of any new investment in a non-interest-bearing reserve account for one year, and calculated the opportunity cost of doing so at about 1.5 percent. With investors in Thailand now often earning 20 percent a year on their money, Ms. Tarisa said, “we did not see that as a major factor to scare the long-term investors.”

“We know very well that we cannot go against the market,” she said. . . [/quote]
nytimes.com/2006/12/20/busin … -thai.html

The policy caused the panic of investors.
One of my fundings drops 1.1% :astonished:
What a christmas gift.

Good news is they suspend the policy before it causes more loss.

But the damage to sentiment will be long-lasting.

HG

Yep. Even with reversing the policy they still managed to broadcast out to the world: “we have no clue about how markets work” and “we might do something boneheaded stupid again”. They also only really pulled back currency restrictions on equity. The curbs are still there for other non-trade transactions. So they didn’t completely learn their lessons and investors will probably take note of this when deciding whether to risk their $$$ being locked up or going elsewhere to invest. There’s enough uncertainty that the market will demand a risk premium in lower stock prices until it is clear that currency controls are completely out of the picture.

With the SET back to 628 anyone tempted now? I pulled out of Thailand a few months ago, so I’m counting my lucky stars.
Personally waiting for the TAIEX to fall to 7500 or the Nikkei back to under 17000 before investing again in these markets.

[quote=“Taiwan for Life”]
Personally waiting for the TAIEX to fall to 7500 or the Nikkei back to under 17000 before investing again in these markets.[/quote]
I don’t think the TAIEX will back to 7500.It may be around 7600-7800 or even 8000 before the Chinese New Year.(next month).
As the The Nikkei will be back to under 17000??
If according to this report ,then the chance is low.
tw.stock.yahoo.com/news_content/ … /9ap5.html

But it just predicts,anyway.

The Thai’s new policy:
news.bbc.co.uk/2/hi/business/6243663.stm
Will it be possible causing the panic drops in the market like last time?

[quote=“wisher”]The Thai’s new policy:
news.bbc.co.uk/2/hi/business/6243663.stm
Will it be possible causing the panic drops in the market like last time?[/quote]

No, completely different situation. Thailand already has loads of strict laws about foreign investment as it is: this is no big deal and I would be surprised if it had a sustained impact.

The policy itself doesn’t seem like it will have much direct impact. But foreign investors are being given yet another signal that the government does not have a consistent policy on foreign investment.