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Thai Stock Market Rebounds After Policy Turnaround

Thailand's stock market bounced back from its biggest-ever loss after the government lifted restrictions on foreign stock investments. But as VOA's Heda Bayron reports from our Asia News Center in Hong Kong, analysts say the abrupt U-turn in policy has left Thailand's credibility in ruins.

Investors, many of them bargain hunters, returned to the Thai stock market Wednesday, buoyed by the government's surprise decision to partially lift capital controls it had imposed Monday.

The Stock Exchange of Thailand index recovered most of its Tuesday's losses, climbing more than 11 percent to 691.55.

On Tuesday, the index plunged 15 percent in reaction to the new capital controls. But after the selling frenzy, the government backtracked, announcing that stock investors would not be covered by the measures.

Stock analysts say the capital controls and their partial reversal within 24 hours have eroded investor confidence in Thailand.

The market volatility comes as Thailand's military-led government, which took power in a coup in September, is still struggling to gain credibility.

Anchal Pathela, a strategist at Siam City Securities in Bangkok, says foreign investors are uneasy about the situation.

"Now they [foreign investors] view that the government in place right now is actually temporary. They are not even the elected government. If they can make such drastic change like that who knows what's coming next?" said Anchal Pathela.

Thai newspapers Wednesday slammed the government's moves calling them "the most expensive economic lesson for Thailand" since the 1997 financial crisis.

That crisis, sparked by speculation and the rapid depreciation of the baht and other Asian currencies led to severe recession and a bail out of Thailand, Indonesia and South Korea by international creditors.

The Bank of Thailand's decision to impose controls on Monday had been fueled by concerns about the appreciation of the baht, which had reached a nine-year high against the U.S. dollar.

Thai exporters had urged the central bank to take action because Thai products were becoming more expensive abroad, which could hurt Thailand's export-led economy.

Under the measures, foreign investors were required to keep 30 percent of their investments in the country for at least a year or face penalties.

That restriction is now lifted for investors in the stock market. But the government said capital controls on bond and other debt investments remain in place.

Most Asian stock markets, which also declined sharply Tuesday, were up Wednesday.