Thai shares bounced back on Wednesday from their biggest sell-off in 16 years after the government back-pedaled on currency controls, but the abrupt policy U-turn shattered confidence in its economic chiefs.
The stock market, which plunged 14.8 percent on Tuesday — its biggest one-day drop since Iraq invaded Kuwait in 1990 — ended 11.2 percent higher after the army-appointed government exempted stock buying from controls on short-term currency inflows just a day after imposing them.
The stunning about-face in the wake of a foreigner-led rout that knocked $23 billion off Asia’s worst-performing bourse this year rekindled memories of the 1997/98 Asian financial crisis and brought howls of derision from analysts.
“The one thing worse than an incompetent central bank is an incompetent central bank that flip-flops,” said Bratin Sanyal, head of Asian equity investments at ING in Hong Kong.
Domestic investors were equally scathing in their criticism of the technocrats appointed by the military leaders who ousted Prime Minister Thaksin Shinawatra in a September 19 coup.
“I’m stunned. They are truly incapable. Please, get the hell out,” 35-year-old businessman Chan Pornpipatkul said.
Meanwhile, Tom Fuller and Wayne Arnold report in the IHT that the Thai central banker says Siam’s the real victim here:
The steep decline of the dollar is punishing Asia’s smaller economies and should be addressed by global financial regulators, the governor of the Thai central bank, Tarisa Watanagase, said Wednesday.
Speaking as the Thai stock market rebounded from a record one-day drop of 15 percent, Tarisa defended the government’s attempt to block short-term foreign investment.
Dismissing criticism that the move had tarnished Thailand’s reputation among international investors, she instead portrayed Thailand as a victim of the large imbalances in trade and savings that send trillions of dollars sloshing in and out of developing countries.
“This is not a problem unique to Thailand,” Tarisa said during an interview. “I’m sure that if this sort of problem is not cured in a cooperative manner, we could see similar measures elsewhere.”
By imposing capital controls on Monday, Thailand sought to slow inflows of foreign money because it had resulted in a double-digit appreciation of its currency against the dollar since the start of the year. Tarisa urged the International Monetary Fund or the Asian Development Bank to find a solution to the problem. Otherwise, she said, “The smaller, open economies will have to take the issue into their own hands.”
(Emphasis mine.)