Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7481)	12/19/2006 6:44:45 PM
From: John Pitera	Respond to of 33421

Thailand..a 1 country wrecking ball for global market stability...... this should not be as bad as setting off the asain contagino of 1997, but ya got wonder about how Thai govt U-turns after stock market routed Tuesday, December 19, 2006 8:48:36 AM (GMT-06:00) Provided by: Reuters News By Orathai Sriring BANGKOK, Dec 19 (Reuters) - The Thai government performed an abrupt U-turn on Tuesday after the stock market suffered its worst fall in 16 years as foreign investors pulled the plug in response to drastic measures to rein in the baht. Hours after the central bank rebuffed a plea from a stunned stock market chief to withdraw them, Finance Minister Pridiyathorn Devakula announced equity investments would be excluded from the restrictions, starting Wednesday. Investors who had just watched the Bangkok market plummet 14.8 percent -- its biggest single-day drop since Saddam Hussein invaded Kuwait in August 1990 as foreigners sold $700 million of Thai shares -- were stunned and disgusted. "It's a joke, isn't it? A total farce," a foreign banker in Bangkok said. "Things will obviously go up tomorrow, but not to where they were because the risks have clearly changed. This will leave a bad taste in people's mouths for a long, long time." Domestic dealers were equally furious. "Are they playing games? This looks really bad. How can they change their minds? Why didn't they tell us sooner? And why now? The damage has been done," said the head of research at a Thai brokerage, who did not want to be named. The Franklin Templeton Thai Fund <TTF.N>, an exchange-traded fund tracking Thai stocks which fell 9 percent after the central bank imposed the new restrictions, rose 3.4 percent to $11.15 rose after Pridiyathorn's climbdown. The sell-off evoked memories of Asia's 1997/98 financial crisis prompted by a baht devaluation and triggered stock drops of 2-3 percent in Kuala Lumpur, Singapore and Jakarta. The Thai bourse was forced to halt trading for the first time in the market's 31-year history as the main index <.SETI> dropped 10 percent -- and kept on going as foreign investors made for the exit as it resumed. At one point, the index was down 19 percent, cementing Thailand's position as the worst performer in Asia this year. "BLOODBATH" Under the original version of the rules, investors had to keep all sums over $20,000 not linked to trade or foreign direct investment in Thailand for at least a year or risk stiff financial penalties. The baht <THB=>, the strongest Asian currency against the dollar this year, dropped as much as 2.5 percent from Monday's 9-1/2-year high in response to a Bank of Thailand (BoT) move analysts described as draconian. Reaction in the bond markets -- still subject to the new rule despite the reversal on stocks -- was swift as the headlong departure of international investors pushed yields up 20-30 basis points for all maturities. "Please call an ambulance, there is a bloodbath," a dealer at a domestic brokerage said. "I think it's only the first round. There is a lot of money already in the Thai markets. If they're pulling out, we're dead," he said. Bourse president Patareeya Benjapolchai begged BoT Governor Tarisa Watanagase -- its first woman governor, who has been in the job less than three months -- to change her mind. The bank slapped down his plea, saying it stood by the move. Rubbing salt into the wound, her former boss Pridiyathorn -- appointed finance minister after a Sept. 19 coup -- said the military-appointed government would not step in. Within five hours, he had essayed a stunning volte-face. "Everyone agreed that this will ease foreign investor concerns and the money should come back into the market as market fundamentals remain good," he said. "I insist there has been no damage and market value will increase later....( editorial HO HO HO) . It's not against our policy as the central bank's policy is to prevent the baht's strength. But when there were side effects, we had to fix them," he said. The long-term repercussions on foreign investment could be significant, especially given the uncertainty created by the army's removal three months ago of broadly pro-business Prime Minister Thaksin Shinawatra. Global index-compilers MSCI Barra and FTSE said they were studying the bank's currency controls to see whether Thailand should be dropped from international equities indices. Analysts said the bank's action showed the generals might be prepared to tighten the squeeze on outsiders. "This move will likely also heighten fears of more authoritarian controls on foreign participation in general," UBS Securities said in a research note. The central bank said it had been forced to act because short-term money inflows jumped to around $950 million in the first week of December from $300 million a week in November. But many analysts questioned why it had not simply cut interest rates to curb the baht's advance. Amid confusion about its imposition of the new measures, several foreign banks stopped quoting the baht

To: John Pitera who wrote (7481)	12/19/2006 6:52:20 PM
From: John Pitera	Respond to of 33421

US Treasury says China not a currency manipulator Tuesday, December 19, 2006 5:10:36 PM (GMT-06:00) Provided by: Reuters News (Adds reaction from Capitol Hill lawmakers, paragraphs 4-7; comment by White House official, 19) By Glenn Somerville WASHINGTON, Dec 19 (Reuters) - The U.S. Treasury Department declined on Tuesday to name China a currency manipulator, welcoming steps Beijing has taken to let its yuan currency rise in value but urging faster movement. "This increased flexibility ... is considerably less than is needed," the Treasury Department concluded in a twice-yearly report to Congress on the foreign exchange practices of key U.S. trade partners. The report did not find any country that sought an unfair advantage in U.S. markets by keeping its currency artificially low against the dollar. The findings go to the Senate Banking Committee, will schedule hearings at which Treasury Secretary Henry Paulson will testify. U.S. lawmakers were disappointed. Incoming Banking Committee Chairman Chris Dodd, a Connecticut Democrat, said he wanted to hear from Paulson what steps he "can and should take to create a level playing field in our economic relations with China." Two leading critics -- Democratic Sen. Charles Schumer of New York and Republican Sen. Lindsey Graham of South Carolina -- charged that Chinese currency manipulation was "as plain as the nose on your face." The incoming chairman of the Senate Finance Committee, Democratic Sen. Max Baucus of Montana, said the currency report was "a policy tool that has seen its day" and pledged to try to come up with something that would bring more market pressure to bear on China. A senior U.S. Treasury official said the law underlying the currency report requires a finding of "intent" to compete unfairly through currency manipulation. But Chinese officials say they are gradually allowing market forces a greater say so intent to use policy for unfair gains is missing, he added. Treasury has not named any country a currency manipulator since 1994, when China was given the brand. NO ONE HAPPY Baucus said he and outgoing committee chairman Sen. Charles Grassley, an Iowa Republican, would pursue legislative proposals "that more effectively address American concerns regarding unfair currency policies" by other countries. U.S. lawmakers have complained China's currency is so undervalued that it has cost millions of American jobs because Chinese-made consumer goods are priced so cheaply that U.S. companies cannot compete. The U.S. Treasury did say the sluggish pace at which China was letting the yuan, or renminbi, rise in value was making it difficult to correct global imbalances like the United States' huge deficit on trade. "China's cautious approach to exchange rate reform continues to exacerbate distortions in the domestic economy and impede adjustment of international imbalances," the Treasury said, adding that it is against China's own interests to move so slowly. "Lack of monetary policy autonomy due to limited exchange rate flexibility presents a major obstacle to rebalancing growth and improving the efficiency of financial intermediation," the Treasury said, meaning Beijing cannot adequately use interest-rate policy to fine-tune its economy. Paulson has set a new course for pursuing broad-based Chinese economic reform through a twice-a-year "strategic economic dialogue" with China. LIMITED AGREEMENT Paulson took six other Cabinet members and Federal Reserve Chairman Ben Bernanke to Beijing last week for 1-1/2 days of talks that produced agreement to try to shrink imbalances by boosting U.S. savings and promoting greater domestic spending and currency flexibility in China. Bernanke said a stronger yuan would enhance China's future growth and stability by giving the central bank more control over monetary policy. In remarks prepared for delivery to a Beijing think-tank, Bernanke referred to an undervalued yuan as an "effective subsidy" for Chinese exporting firms, but he dropped the reference when he gave the speech. White House economic adviser Allan Hubbard, at a lunch with reporters on Tuesday, said he thought Paulson's approach to China was making progress but added: "Obviously it's not going to be overnight." Separately on Tuesday, the Commerce Department rejected a petition asking it to label China's currency policy a subsidy that could have led to the imposition of countervailing duties on Chinese-made imports. "I think that would just represent a change in policy that we're not prepared at this point to make," said Commerce Undersecretary Franklin Lavin. The petition had been brought by a U.S. manufacturer who had sought the duties against imports from China, Indonesia and South Korea.