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Bangkok, Dec 19: Thai stocks plummeted nearly 15 per cent after the country's central bank introduced new controls on foreign investment, rattling markets throughout the region in the most dramatic turmoil since the 1997 Asian financial crisis.
Investors dumped stocks in Hong Kong, India, Indonesia, Malaysia, South Korea and the Philippines amid contagion concerns that the plunge might spread through the region and trigger the kind of slump that enveloped Asia nearly ten years ago, reports the Scotsman.
The Stock Exchange of Thailand's benchmark SET index closed down 14.8 per cent at 622.14, after plunging as much as 19.5 per cent earlier - the market's biggest one-day drop ever - and brought the benchmark index to its lowest since October 2004. The hardest-hit sectors were banking, energy and telecommunications.
The plunge came after the Bank of Thailand announced its measures to clamp down on speculative inflows that have lifted the Thai currency to a nine-year high of 35.09 baht to the US dollar on Monday.
Starting Tuesday, all banks are required to hold in reserve for one year 30 per cent of capital inflows that are not trade- or services-related, or repatriation of Thai residents' investments abroad, the bank said. Also, foreign investors must pay a 10 per cent penalty unless they keep funds in the country for a year.
The baht weakened to 35.93 per dollar, but the move appeared to spook international investors, some of whom viewed the measures as drastic and dimming the allure of Thai stocks.
But David Cohen, chief of Asian economic forecasting for Action Economics in Singapore, said the situation in Thailand now is fundamentally different from 1997-8.
"The big problem ten years ago was currency weakness; now, it's currency strength. The measures were to resist the appreciation of their currency," Cohen said.
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