Il rimbalzo c'è stato......
Wednesday December 20, 2:43 PM
Stocks rebound, but Thai credibility in tatters
By Ed Cropley
BANGKOK (Reuters) - Thai shares bounced back from their biggest sell-off in 16 years after the government scrapped controls on foreign stock buying, but the abrupt policy U-turn shattered confidence in its economic chiefs.
The market, which plunged 14.8 percent on Tuesday -- its biggest one-day sell-off since Saddam Hussein invaded Kuwait in 1990 -- leapt 10 percent after the army-appointed government exempted stock buying from controls on short-term baht inflows just a day after imposing them.
"Some foreign investors are buying back, but not so much," said Capital Nomura analyst Kavee Chukijkasem. "They're still cautious as the measures have ruined confidence. I think domestic funds may take this chance to collect shares."
Big-cap stocks such as oil-and-gas firm PTT PCL and Bangkok Bank , owned in part by the foreigners who had stampeded for the exit, led the rise.
The recovery was well short of the index's closing level on Monday, before the Bank of Thailand (BoT) announced its drastic assault on the speculators it blamed for catapulting the currency 16 percent higher in 2006 against the dollar.
The International Monetary Fund (IMF), which described the baht measures as "too strong and far-reaching," welcomed Finance Minister Pridiyathorn Devakula's decision on Tuesday evening to lift the restrictions for equity investments.
But by then, foreigners had already dumped a net $700 million of shares in a frenzy of selling on Asia's worst performing stock markets this year and Thailand's reputation in the eyes of international investors was lying in tatters.
"INVESTOR HELL"
IDEAglobal headlined a research report: "Tourists' haven, investors' hell" as analysts queued up to pour derision on the central bank's intervention and subsequent flip-flop.
Tarisa Watanagase -- appointed as the central bank's first woman governor just two months ago -- agreed with her former boss and mentor Pridiyathorn on the need to exempt stocks.
"We had to reverse the measures as the market reacted more than we expected," she told reporters.
But such as explanation did little to assuage criticism of the policy changes.
"The one thing worse than an incompetent central bank is an incompetent central bank that flip-flops," said Bratin Sanyal, head of Asian equity investments at ING in Hong Kong.
Others said Pridiyathorn, who moved from the central bank to the finance ministry after a September 19 coup against Prime Minister Thaksin Shinawatra, must also shoulder the blame.
"They are proving themselves to be very unprofessional. Their actions are very irresponsible. They have totally lost credibility," said Catherine Tan, head of Asia Emerging Markets at Forecast in Singapore.
"I don't see foreigners returning to Thailand anytime in the near future. Markets now have no confidence in the government."
ABN AMRO cut its investment rating on Thailand to "underweight" and questioned how the economy is being run in the aftermath of the coup -- Thailand's 18th in 74 years.
"Policy decision-making seems to be at odds with the workings of capital markets," the investment bank said.
"BLUNDER"
Tuesday's sell-off also sparked memories of the 1997/98 Asian financial crisis -- triggered by a baht devaluation -- and prompted falls in other stock markets and currencies in the region.
Thailand's Nation newspaper, which bore a front page headline "820 billion baht blunder" in reference to the $23 billion wiped off the share market, said the careers of Pridiyathorn and Tarisa were hanging by a thread.
"Thailand's credibility as an attractive venue for foreign investment had already been seriously damaged when the finance minister and the Bank of Thailand realized their costly mistakes," the English-language newspaper said in an editorial.
Bond yields were largely steady in the secondary market on Wednesday, with those on the long end falling slightly after central bank intervention, dealers said. Yields had jumped 20-40 basis points across the board on Tuesday.
The intervention also raised questions of competence.
"Why did they intervene in the bond market today? They should known bond markets will fall after the baht measure," Forecast's Tan said.
The baht, the strongest Asian currency against the dollar this year, was trading around 35.6 against the dollar. It fell more than 2.5 percent from a 9- year high on Monday, when the central bank first announced the baht measures.
The curbs were designed to rein in the baht's rise by forcing speculators to keep their money in the country for at least a year or face a 10 percent penalty.
Trade-related deals and repatriation of funds by Thai residents were excluded. Pridiyathorn added equity-related transactions to the exclusions late on Tuesday.
Exporters had welcomed the curbs because a rising baht threatens to make their goods uncompetitive on world markets and could reduce earnings repatriated from overseas.
(Additional reporting Arada Therdthammakun and Orathai Sriring in Bangkok and Umesh Desai in Hong Kong)
