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 Stock Market
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20 Dec 06 11:28
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Finance Ministry lifts controls on stock market inflows
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TNA
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BANGKOK, Dec 20 - Pressed by strong criticism over a mandatory reserve on short-term capital inflows that caused an unexpected plunge in the Stock Exchange of Thailand composite index on Tuesday, the Finance Ministry has agreed to ease the measure by lifting the withholding of a 30 per cent portion of foreign currencies bought or exchanged for investment in SET and direct investment.
Speaking after a meeting with top officials of the Bank of Thailand, Securities and Exchange Commission, SET, local and foreign commercial banks, fund managers, and stock brokers, Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula said the reserve requirement on the short-term capital inflows was raised for discussion.
All parties conceded the mandatory reserve had caused an unexpectedly harsh impact on the stock investment as the SET index plummeted more than 100 points upon the introduction of the measure.
So, they determined the measure should be relaxed by lifting the deduction of 30 per cent of foreign currencies brought for stock and direct investments.
But for short-term capital inflows considered as baht speculation, financial institutions are still required to withhold 30 per cent for the reserve requirement.
Commercial banks and brokers are required to report foreign exchange transactions to the central bank on a weekly basis.
While the adjustment of the measure is expected to make the SET index rebound, it would help weaken the baht as well.
He conceded the SET index had plunged on the introduction of the reserve requirement.
The adjustment was needed to assure foreign investors that the government is still paying attention to supervising investment in the stock market.
The country's overall economy would not be adversely affected once investment confidence in the stock market is restored, he said.
He projected that the Bank of Thailand will allow foreign investors to deposit money in baht denomination with financial institutions in amounts exceeding Bt300 million in support of relaxing the reserve requirement. (TNA)
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