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Tuesday December 19, 3:45 PM Thai stocks crash as investors panic over central bank rules Photo: AFP Click to enlarge BANGKOK (AFP) - Thai stocks have suffered their worst losses in more than 30 years as panicking investors fled the market after the central bank imposed draconian measures in an effort to halt the baht's rise. The Stock Exchange of Thailand (SET) composite index nosedived 85.89 points, or 11.76 percent, to close the morning session at 644.66, marking the biggest one day drop ever in the 31-history of the bourse. Losers led gainers 444 to 4, with 10 stocks unchanged on turnover of 3.7 billion shares worth 42.6 billion baht (1.2 billion dollars). "Investors were really scared by the central bank's measures. Short-term investors were fleeing the Thai stock market," said Tarisa Chaisuntornyotin, a senior market analyst at Siam City Securities. "Selling was just massive. We never saw anything like this before," Tarisa added. Before the market's opening, Finance Minister Pridiyathorn Devakula hailed the new regulations, the harshest capital controls since the 1997 Asian financial crisis, "as the best ever measures" taken by the Bank of Thailand. Pridiyathorn, who was the central bank governor under the administration of deposed premier Thaksin Shinawatra, faced growing pressure from Thai exporters calling on the army-backed government to curb the soaring local currency which hit a nine-year high Monday. In the face of the unprecedented losses, the Stock Exchange of Thailand said it would ask the central bank to "reconsider" the new currency control measures, according to an exchange spokeswoman. The Thai currency, which hit a new nine-year high of 35.12 to the dollar Monday, fell to 35.72-75 Tuesday afternoon. The Thai baht has risen by some 14 percent this year, putting pressure on the country's key exporters. The strong baht makes Thai exports less competitive in overseas markets and slashes the value of companies' repatriated profits. "The Thai baht rose mainly due to capital inflows. You have capital inflows because the Thai stock market is also going up this year," said Bob Broadfoot, managing director of Political and Economic Risk Consultancy in Hong Kong. "International investors were betting the Thai currency would appreciate and that's why we saw more capital inflows," he said. Foreign investors account for 40 percent of the Thai stock market with 50 percent from domestic investors and 10 percent from institutional investors. The central bank said that from Tuesday, financial institutions would be required to withhold 30 percent of foreign currencies coming into the baht, except those related to exports. If such funds were kept in the country for a year, the depositor would get all their money back. But if investors wanted to withdraw funds earlier, then the 30 percent would be kept, making it virtually impossible for any short-term investors to make a gain. The stock losses in Bangkok were an unsettling echo of the Asian financial crisis which was sparked when the Thai government was forced to float the baht in July 1997 in a bid to bolster the country's then flagging exports. The baht promptly crashed, took the Thai economy with it and sent a tidal wave of debt and default sweeping across the region which cost billions of dollars to put right. The impact was so great that it has taken years for many regional stockmarkets to revisit pre-crisis levels and despite recent gains, Thailand's own bourse still remains far below its all-time high of 1,753.73 in January 1994. Earlier on Tuesday, the Thai stock exchange suspended trading for 30 minutes after share prices plunged more than 10 percent in opening trade, but investors continued to dump shares following the resumption of trading. Under current rules, if the stockmarket falls by 20 percent, the SET can suspend trading for one hour. The stock exchange is to open the afternoon session at 2:30 pm (0730 GMT).