BOT Move Causes Biggest Thai Stock Market Crash in 31 Years

[Gaybutton]

The following appears in THE NATION:

_____

 

Panic as Stock Market Records Biggest Crash in 31-Year History

 

The stock market yesterday crashed by almost 20 per cent, the biggest one-day fall in the bourse's 31-year history. It hit a two-year low on concerted sell-offs by foreign and local investors who were spooked by the 30-per cent reserve withholding on new capital inflow.

 

About Bt820 billion worth of market capitalisation was wiped out in a single day, leaving the Stock Exchange of Thailand at Bt4.63 trillion.

 

The composite SET Index plunged to 721.85 at the opening bell and headed further south, falling by 10 per cent at 11.30am.

 

This triggered the first-ever implementation of the first-step circuit breaker to halt trading for 30 minutes by the SET since it was created in 1997.

 

Panic selling continued even after the stock market resumed trading and it pushed the market down to almost 20 per cent to the day's trough at 587.92 before rebounding slightly to close the day at 622.14, or a 14.84 per cent drop.

 

Turnover also marked an all-time high at Bt72.13 billion, excluding the Bt73-billion big-lot sale of Shin Corp on January 23 when turnover amounted to Bt94.06 billion.

 

The second worst day was seen both in Bloody May in 1992 and on July 2, 1997, when the SET index slumped 8.8 per cent.

 

The stock market yesterday took the hardest blow from the tough pill prescribed by the Bank of Thailand (BOT), while the foreign exchange market and the bond market were also hit - but not so severely.

 

Yields of all maturity bonds yesterday rose 20 basis points acrossthe board, According to the Thai Bond Market Association, the bond market was blamed as the main source for the baht speculation. The baht at 6pm traded at Bt35.55 against the greenback.

 

The knock-on effect impacted on stock markets in the Asia region, particular in neighbouring countries for fear they would follow in the BOT's footsteps.

 

Indonesian share prices closed 2.85 per cent lower, KLCI lost 2 per cent, The Korea Composite Stock Price Index, or Kospi, fell 0.4 per cent, Singapore's Strait Times dropped 2.23 per cent, Hong Kong's Heng Seng was off 1.19 per cent and Taiwan's stock market closed 0.34 per cent lower.

 

Prime Minister Surayud Chulanont refused to comment on the crash yesterday, saying Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula would explain the issue.

 

The Securities and Exchange Commission (SEC), the SET and brokers urged the central bank to review its tough measures to counter the baht speculators.

 

SEC secretary-general Thirachai Phuvanatnaranubala said in the first trading session the BOT measures had reduced the SET's market capitalisation by as much as Bt500 billion.

 

He said foreign investors are concerned that the central bank may introduce more measures. However, he warned them to wait and consider the consequences before shifting their capital out of the country. Otherwise, they may lose investment opportunities.

 

SET president Patareeya Benjapolchai said the central bank should review the measure and consider imposing controls at the root of the problem to prevent an impact on the overall economy.

 

"The measure has had the worst impact on the Thai stock market and prompted us to employ the circuit breaker for the first time since it was implemented in 1997. The September 11 tragedy pushed the Thai stock market down 9.7 per cent during the day's trade before it recovered," she said.

 

The SET's Board of Governors will today convene an extraordinary meeting to discuss the impact from the central bank's measure.

 

The 20-basis point rise in yields of all maturity bonds, considered as an unusual movement, has taken place five previous times when the BOT announced it would raise the interest rate, said an officer from the Thai BMA, who asked to remain anonymous.

 

However, there are no signs of capital outflow, he said.