Thursday, December 21, 2006

Monetary Control – Lifted!

Thailand made an emergency lifting of its monetary control which has just been freshly imposed 2 days ago. The said measure has caused Stock Exchange of Thailand lost 800 billion Baht in value - the largest one-day drop in its 31-year history.

The initial idea is to relieve the pressure of Thai Baht appreciation against USD recently, worrying that strong currency would jeopardize export of the country. They decided that the short term hot money speculations to be curbed. Thai Finance Minister admitted the authorities have underestimated the impact caused.

In fact the regional stock markets and currencies have gained weight too fast in the past 2 months – 15%! The bullish stock market drives everyone crazy, quite irrational in my opinion. Thought the unexpected blow would cool down the fever lightly, instead the market recomposed swiftly after the curb lifting announcement is made. The whole region is again overwhelmed by the “prosperous” sentiment. Hope this is not a flash in the pan.

Thailand has much to do to soothe and mend the shaken faith of foreign investors.