Thailand

tfwee · Veteran

Thailand

KK · Guru

Thailand Abandons Lockup on Foreign Stock Investments

Dec. 19 (Bloomberg) -- Thailand's government scrapped currency controls on international investors one day after the central bank imposed them and sent the stock market plunging by the most in 16 years. The government is removing a requirement that banks lock up 30 percent of new foreign-currency deposits for a year, Finance Minister Pridiyathorn Devakula said in Bangkok. ``The stock market has fallen too much today,'' Pridiyathorn told reporters at a press conference. ``This is the side effect of the central bank's measure, but we have fixed it already.''

Thai stocks erased $23 billion of their market value today after the central bank said international investors must pay a 10 percent penalty unless they keep funds in the country for a year. The currency controls triggered declines in other emerging stock markets by highlighting the risks of investing in developing economies.

The rules would have limited international investors to using 70 percent of their funds to buy Thai stocks. The requirements stay in effect on other investments, including bonds and property, Pridiyathorn said

Thailand's SET Index tumbled 15 percent to its lowest since Oct. 29, 2004. The index sank 108.41 to 622.14. Morgan Stanley Capital International's Emerging Markets Index fell 1.6 percent to 881.31 as of 2:33 p.m. in London.

Restoring Confidence

``It's very untimely, it's unwarranted and it's badly thought-through,'' said Teng Ngiek Lian, who oversees $1.6 billion in Asian stocks at Singapore-based Target Asset Management in Singapore, before the measures were rolled back. ``If they don't quickly restore confidence, the damage can be quite bad.''

The currency measures came after the baht appreciated to the strongest in nine years, even though the central bank this month introduced steps to limit gains. The monetary authority on Dec. 4 asked companies and commercial lenders not to sell baht short-term debt securities to overseas investors.

The baht had the biggest two-day decline since April 2005 on yesterday's measures.

A military coup on Sept. 19 ousted prime Minister Thaksin Shinawatra and ended seven months of political turmoil. Prime Minister Surayud Chulanont, installed by the military junta after the coup, is planning record spending on roads, subways and other infrastructure projects.

International investors sold 25.1 billion baht ($699 million) more of Thai stocks than they bought today, the largest net sales since at least Jan. 4, 1999, according to data compiled by Bloomberg.

Last Updated: December 19, 2006 09:39 EST

tfwee · Veteran

Singapore shares end sharply lower as Thailand takes measures to protect baht

SINGAPORE (AP) -- The pall of uncertainty created by Thailand's capital controls dragged Singapore shares to a sharply lower close Tuesday.

The Straits Times Index closed down 66.14 points or 2.2 percent at 2,897.30. Decliners outnumbered gainers 494 to 172 with volume rising to 1.6 billion shares from Monday's 1.26 billion.

The Thai stock market benchmark plunged 18.9 percent by 0810 GMT.

Late Monday, Thailand's central bank imposed a hefty reserve requirement on capital inflows to curb speculative buying of the kingdom's currency, the baht.

Thai-exposed stocks were the hardest hit.

Brewer and distiller Thai Beverage Public Company was down 5.5 percent at 0.26 Singapore dollars, luxury resorts operator Banyan Tree fell 11.5 percent to S$1.31, and mobile company Total Access Communications was down 3.3 percent at US$4.06.

CapitaLand, Southeast Asia's largest property developer by market capitalization, dived 5.0 percent to S$5.70 with investors using the Thai crisis as an excuse to book profits on a stock that had risen 67 percent this year.

KK · Guru

BT, December 19, 2006, 5.55 pm

Thai markets routed as baht rules scare foreigners

BANGKOK - Thai stocks plummeted almost 20 per cent at one point on Tuesday in its largest drop since the 1987 financial crisis after the central bank imposed policies aimed at stemming the baht's surge. The Stock Exchange of Thailand's benchmark SET Index declined 142.63 points, or 19.5 per cent, to a five-month low of 587.92 in afternoon trading before closing at 622.14, or 14.84 per cent down. The hardest hit sectors were banking, energy and telecommunications.

Patareeya Benjapolchai, the president of the stock exchange, said it was the first time that the index had dropped more than 10 per cent - which triggers an automatic 30-minute suspension of trading - since 1987.

The double-digit drop came after the Bank of Thailand late on Monday announced its toughest measures yet to clamp down on speculative inflows that have lifted the Thai currency, the baht, to a nine-year high. Starting on Tuesday, all banks are required to hold in reserve for one year 30 per cent of capital inflows that aren't trade- or services-related, or repatriation of Thai residents' investments abroad, the bank said.

The Stock Exchange of Thailand on Tuesday called for the central bank to review its decision to impose new rules aimed at weakening the baht, saying the move prompted foreign investors to dump Thai shares. Ms Patareeya said she hopes the Bank of Thailand will use the measures, announced late on Monday, only for the short term.

The move is a sign that Asian countries, despite their strength, aren't willing to let their currencies rise sharply and will intervene and impose controls if necessary. In recent weeks, the Thai central bank has bought dollars in the foreign exchange market to restrain the baht's strength. The baht, which hit a nine-year high of 35.09 to the US dollar on Monday, weakened to 36.17 early on Tuesday in reaction to the central bank's move, but then rose to 35.69 by midday.

Effectively, the new steps mean that if a foreign investor allocated the equivalent of 100 million baht to the Thai bond market, the investor could only buy 70 million baht of bonds, while the remainder would be withheld by the central bank, earning no interest. If the investor wanted to withdraw the money in less than a year, only two-thirds of the amount withheld would be returned.

Central bank chief Tarisa Watanagase said on Tuesday that she expected the drop in the market would be cushioned by bargain-hunting partly from foreign funds as foreign fund inflows already in Thailand were not subjected to new measures if shifted from one asset to another. -- AP

KK · Guru

Extracts fm CIMB report dated 18- Dec-06,

Reserve requirement for short-term capital inflows

After recent measures failed to curb the appreciation of the Thai baht, the central bank has issued tougher regulations. With effect from today (19 Dec), a 30% unremunerated reserve requirement will be implemented for short-term capital inflows. This will not cover transactions related to goods and services or the repatriation of investments abroad by residents.

After one year, foreigners will get back the 30% reserved amount in full. However, if they want to bring out the money before the year is up, they will get back two-thirds of the reserved amount. In other words, from today onwards, short-term capital inflows into Thailand will be subject to a 10% tax.

Foreign-exchange transactions before 19 Dec 06 are exempted from this new requirement. As such, investors who already have money in Thailand can take out their money in full.

The new requirement proves to be strong medicine for the Thai baht which weakened from THB35.08/US$ to THB35.97/US$ (-2.5%) overnight.

Implications for the stock market

The new measure is negative for the stock market as it would discourage foreign inflows into the country. Although foreigners can take out their money in full after one year, we believe they will not welcome the inflexibility of waiting for a year.

Additionally, investments in the stock market these days are rarely for the long term. Therefore, apart from the initial knee-jerk reaction, we believe the market will face more selling pressure from foreign investors. Thai investors are likely to cave in to this pressure and start selling as well.

It is not certain how long the central bank will maintain this new reserve requirement. If Thai baht weakens sufficiently or if political developments take a turn for the worse, the central bank may consider lifting the requirement. For the present, we believe new foreign money will be small. And with anticipated further weakness in the Thai baht, foreign investors whose money is already in Thailand may lock in profit and take out the money before the baht weakens further.

Over the next few weeks, if the market were to dip sharply to the 680 level, we believe it would be a good opportunity to buy into the market.

KK · Guru

Extracts fm CIMB Report dated 20-Sep-06,

Reviewing Singapore’s Thai exposure

Repercussions of Thailand coup. The events in Thailand will have repercussions throughout this region with the immediate knee-jerk reaction likely to lead to a broad sell-off in stocks in Singapore this morning. The exposure of Singapore’s corporate earnings to Thailand is minimal and history has shown that in the last Thai military coup in 1991, the STI actually rallied instead. While the events are different, we believe that the long-term impact on Singapore stocks is minimal. We would however, list the names in Singapore that will have an impact.
Impact minimal among the big cap stocks. Among the big-caps, UOB, DBS, Singtel, SIA, Capitaland, Kepland would have an average 3% impact to Thailand. We believe that the names that investors should seek refuge in would OCBC, M1, Starhub, City Developments, KepCorp, SembCorp, ST Engineering.
Technology has the greatest exposure. Among Singapore listed stocks, technology looks to bear the brunt of the impact. Potential losers could be tech names like Magnecomp, Innovalues, E&E and ECS though if the coup is short-lived and production processes are not interrupted, overall impact could be minimal. We see any weakness in Innovalues and E&E as buying opportunity. The other big loser outside the tech space would be Cerebos. Again, impact could be minimal if consumption impact is short-lived.