Stocks rebound, but Thai credibility in tatters

By Ed Cropley
Wednesday, December 20, 2006; 3:13 AM

BANGKOK (Reuters) - Thai shares bounced back from their biggest sell-off in 16 years on Wednesday 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 drop since Iraq invaded Kuwait in 1990 -- leapt 10.6 percent after the army-appointed government exempted stock buying from controls on short-term currency inflows just a day after imposing them.

The stunning about-face in the wake of a foreigner-led rout that knocked $23 billion off Asia's worst-performing bourse this year and rekindled memories of the 1997/98 Asian financial crisis, brought howls of derision from analysts.

"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.

Domestic investors were equally scathing in their criticism of the technocrats appointed by the military leaders after their September 19 coup to oust Prime Minister Thaksin Shinawatra.

"I'm stunned. They are truly incapable. Please, get the hell out," 35-year-old businessman Chan Pornpipatkul said.

The rally, spearheaded by big-cap stocks such as oil-and-gas firm PTT PCL (PTT.BK) and Bangkok Bank (BBL.BK) -- owned in part by the foreigners who had stampeded for the exit on Tuesday -- was the market's biggest one-day jump in seven years.

But the foreigners who ditched a net $700 million of stock a day earlier were in no hurry to return, analysts said.

"They're still cautious as the measures have ruined confidence. I think domestic funds may take this chance to collect shares," Capital Nomura analyst Kavee Chukijkasem said.


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 late on Tuesday to lift the restrictions for equity investments.

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