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Panic Sell-Off Forced Thailand To Lifts Investment Controls



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Dec 19 2006
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After being punished today, 19-Dec-2006, the Thai government is making a U-turn in lifting controls on foreign investment in stocks after the market plunged nearly 15 percent, sending panic throughout regional bourses of worries about a repeat of 1997 Asian Economic Crisis. Investors dumped stocks in Hong Kong, India, Indonesia, Malaysia, South Korea and the Philippines amid contagion concerns today.

Associated Press reported minutes ago that Finance Minister Pridiyathorn Devakula announced the control will only apply to foreign investments in bonds and commercial paper as part of central bank’s measures to stem the surge of speculative investment in the Thai baht.

The Stock Exchange of Thailand’s benchmark SET Index closed down 14.8 percent at 622.14, after plunging as much as 19.5 percent earlier with the hardest hit sectors being banking, energy and telecommunications. The SET has reacted by calling 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.

I’m glad Thai government has come to realize its’ silly mistake and has the courage to correct it immediately. But I doubt they have a choice anyway, so the military government has to eat the humble pie whether they like it or not. The behavior of such drastic action (to impose investment control earlier yesterday) reflects a stern decision normally seen only within military culture.

I believe besides the pressure from Stock Exchange of Thailand and conglomerate businesses, the threat of being left out from the MSCI (Morgan Stanley Composite Index) investment weightage and probably advises from the King Of Thailand could forced the military government to make such a fast U-Turn.

So, what would happen tomorrow? Panic buying will swarm the stock market and don’t be surprise if the gain is a two digit figures. The psychology of the market – Greed & Fear will remains for centuries to come. In fact, it would be bullish to the other regional markets with exception of Thailand (you don’t think the investors are forgiving after this incident, do you?) as the extra hot-money will need somewhere to park – where else do you think these money will land?

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You do u turn when NO WAY OUT. 🙂

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