Bahting the hand that feeds you

Thailand to lock up 30% of new fund flows

Thailand's regulators required banks to lock up 30 percent of new foreign exchange deposits for a year to curb currency speculation, causing the baht to slump by the most in almost three months.

Overseas investors buying baht starting tomorrow will only be able to invest 70 percent of what they transfer, and only recoup all of their funds if they keep the money in Thailand for more than a year, central bank Governor Tarisa Watanagase told a briefing in Bangkok today. Those who withdraw the reserved amount in less than a year will be penalized 33 percent of that 30 percent portion, she said.

"They're getting pretty aggressive, as when a central bank starts withholding money it's pretty serious," said Steve Rowles, a Hong Kong-based analyst at CFC Seymour Ltd. "This is really going to put the brakes on the baht."

54 against the dollar as of 6:18 pm in Bangkok, its biggest daily fall since September 20, when it plunged 1.4% after military leaders seized power in the overnight coup.

Asian markets slide on new risk fears By Chris Oliver

Asian stocks fell sharply in afternoon trading Tuesday with share indexes in Singapore, Malaysia and Indonesia leading the decline, as regional markets paced a stock market rout in Thailand after the central bank moved to impose tough capital controls to stem a rise in its currency.

Thailand's leading stock index plunged 10.14% after the central bank announced new capital controls which take effect Tuesday.

"It is group contagion with people worried that other central banks like the Philippines and South Korea, which have also seen strong currency appreciation this year, may adopt similar draconian measures," said Shahab Jalinoos, head of foreign exchange strategy at ABN Amro in Singapore.

"If you own a stock and you know in the future the likelihood of a foreigner buying that stock is massively reduced, you would probably want to sell."
The Nikkei fell 1% to 16,789.30 in afternoon trading.

Singapore's Straits Times Index fell 1.6%.

Australia's S&P/ ASX 200 fell 0.6% and South Korea's Kospi was down 0.3. Malaysia's KLSE Composite fell 1.7% and Indonesia's JSX Composite fell 1.6%., Taiwan's Weighted Price Index erased earlier gains to trade 0.2% lower and China's Shanghai Composite fell 0.2%.

In Hong Kong the blue-chip Hang Seng Index ended the morning session down 2.3% to 18,955.37. The Hang Seng China Enterprises Index, a gauge of 37 China-incorporated companies listed in Hong Kong, fell 1.8% to 9,068.65.

Emerging-Market Stocks Slump on Thailand's Investment Controls By Chen Shiyin and Mahmoud Kassem

The MSCI Emerging Markets Index has rallied 33 percent since reaching its low for the year on June 13 as the Federal Reserve stopped raising interest rates after 17 consecutive increases and commodities prices rebounded.

"On the back of this new restriction by Thailand's central bank global investors have to recognize risk again," said Soichiro Monji, who helps oversee about $47 billion as senior strategist at Daiwa SB Investments Ltd. in Tokyo. "Investors might shift from developing markets to other safer markets."

"There is a general question about who might be next in following Thailand's move," said Adrian Mowat, JPMorgan Chase & Co.'s regional equities strategist in Hong Kong.

Is this one of those X-factor things that snowballs to a much larger problem? The whole Asian-crisis thing in 1998 started in Thailand with a run on the baht.