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Fri, Sep 22, 2006 - Page 10 News List

Thai shares rebound after early plunge

ECONOMY SURVIVES Following some early panic selling, share prices recovered somewhat, easing fears of a repetition of the Bangkok-centered financial crisis of 1997


Thai share prices dropped in morning trade as markets opened for the first time since the military coup, but analysts said yesterday they expected little economic fallout from the ouster of Prime Minister Thaksin Shinawatra.

They said there was a brief period of panic selling at the opening which led to losses of some 4 percent but more importantly, a rebound had set in quickly, suggesting the coup would do no greater damage.

The military had ordered the markets, as well as government offices and schools, closed on Wednesday after the coup overnight on Tuesday.

The Stock Exchange of Thailand (SET) composite index was down 4.25 points to 698.31 at the end of the morning session, off a low of 673, while the blue-chip SET 50 index was 0.76 points to 492.46.

Several analysts suggested that after months of political turmoil under Thaksin, investors would probably welcome a return of strong government under the military.

"It was panic selling [at the start] ... as investors, mainly foreign funds, do not totally understand the situation in Thailand which has seen no violence [in the coup] so far," said Thanomsak Saharat, a senior stock analyst at Capital Nomura Securities.

"Related agencies will have to explain developments in Thailand much more clearly to investors because in other countries, coups lead to something very different," he said.

While stocks fared relatively well, the baht too recovered to 37.55.57 against the US dollar after Wednesday's sharp sell-off to 37.75-80 from levels around 37.30 before the coup.

Dealers said the coup initially evoked concerns in light of the devastating 1997 Asian financial crisis, which had its epicenter in Bangkok after the government allowed the baht to float freely.

That sparked a collapse in the Thai financial system which then spread across the region.

This time around, however, the relatively peaceful nature of the coup, and the different economic backdrop compared with 1997, should limit the fallout.

"We doubt that there would be a 1997-type crisis in Thailand," said Lehman Brothers currency analyst Rob Subbaraman.

"Besides much stronger economic fundamentals, the Bank of Thailand is much better equipped to defend the Thai baht," he said.

"But even more important, Thailand is currently not overheating from massive hot money inflows, as was the case in 1997," Subbaraman said.

Ratings agency Moody's Investor Service reaffirmed Thailand's ratings and stable outlook yesterday, saying the country's fundamentals were strong enough to weather the instability.

"We view the Sept. 19 coup as primarily a domestic political development reflecting tensions between the Thaksin administration, the army and the Bangkok elites, rather than as a financial development," Moody's vice president Thomas Byrne said.

Meanwhile, Singapore's DBS Group maintained its forecast of Thailand's economic growth of 4.9 percent this year and 5.1 percent for next year but said the tourism sector would feel immediate effects as holidaymakers stay away.

"Heightened uncertainties brought by the coup have not led us to alter our outlook for a slowing economy," DBS said in its report.

"Foreign investment may also be affected until a new government takes clearer form," it added.

"The economy would be affected by three to six months as confidence eroded. Impacts would be seen in areas of tourism, investments and domestic consumption," said Aat Pisanwanich, economic professor at the University of the Thai Chamber of Commerce in Bangkok.

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