However, I hope the measures affecting inflows for stock market investment will be short-lived or will soon be eased to avoid excessive negative effects on investor confidence and the ability of Thai companies to raise investment capital.

Chile is often cited as an example where similar reserve requirements were used successfully in the 1990s to prevent inflows of short-term "hot" money from interfering with the exchange rate mechanism. However, it is important to understand that circumstances in Chile then were different from Thailand today. When Chile increased its short-term inflow reserve requirements from 20 to 30 per cent in 1995 and extended them to include stock market investments, the central bank was operating a semi-fixed exchange rate against a basket of currencies, similar to Thailand's exchange rate mechanism before the 1997 crisis.

Chile at that time needed to increase domestic interest rates in order to stabilise the economy. The reserve requirements eased the pressure on the exchange rate peg by making the higher interest rates less attractive to foreign depositors. The main difference with Thailand today from the macro perspective is that it no longer operates a semi-fixed basket-based exchange rate and that the interest rate cycle seems near or at the peak with a substantial cooling in private consumption and investment growth already in place.

Conditions in the SET are also hugely different from those in the Chilean stock market in 1995. Foreign investment today in the SET is significant and foreign investors generally invest in Thai shares directly. In Chile at that time foreign investment was less significant and was mainly in the form of American depository receipts (ADRs) traded on the New York stock exchange over which the Chilean authorities had no control once they were already issued, since they were traded offshore in US dollars. They could only apply reserve requirements at the point that new ADRs were created.

While I agree that measures to control baht speculation are necessary, I would hope that they could be eased for stock market inflows by perhaps reducing the lock-up period from 12 months to six or three months and by targeting the outflow rather the inflow. That would mean applying a penalty to inflows that have not been fully invested in Thai stocks for the required period at the time the outward remittance is made. Thus foreign investors would be able to invest $100 in Thai shares for every $100 brought in, rather than only $70, which is a huge disincentive. Otherwise there could be a negative effect on the capital-raising abilities of Thai companies that could in turn affect private investment, which is already slowing. The present situation has certainly not been caused by overheating in the SET, which was already one of the world's worst performing stock markets in 2006 before the new measures were introduced.

George Morgan

Bangkok

------------------------------------------------------

Over-reaction in response to the baht's strength

My first reaction to the new harsh measures against speculation introduced yesterday is short-term negative. I view it as overkill to a real problem. Once again speculators helped create this problem that made the authorities act, which I view will not last. Now there is much confusion, hence the broad sell off. The uncertainties will be negative for the market tomorrow until the BOT issues clarifications. The lack of clarity in the announcement reflects badly on the BOT. Nowhere is equities investment mentioned specifically, leading to confusion. I expect some clarification by the BOT. If stocks are exempted, there would be a measure of relief, but much damage has been done. I can only say that members should be content to own high-value shares with growing earnings and high dividends, as these overall will (or should) hold up better in this adjustment which has delayed the expected bull market for 2007. I have shifted my thinking to bullish for later into next year. Yet, this latest overkill measure should not have a significant impact on corporate earnings of most listed value firms on the SET. Nor should it affect investors who brought baht in before this announcement.

Paul A Renaud

Switzerland

---------------------------------------------------

Junta's action on currency will kill off stock exchange

First the junta kills off democracy. Then they claim they are only in power temporarily, while they obviously push for an unelected prime minister, which will open the gates for long-term involvement. Next they kill off the stock exchange. It is commonly known that "military intelligence" is a contradiction in terms. What they have done with the withholding tax not only affects the lives of the rich but also ordinary Thai people. What is next? Will we introduce the kip or the kyat as our new currency? At least they are still depreciating against the dollar. Sonthi should pack his bags, fire his Cabinet and immediately hold a new election in which nobody is excluded. Let us choose ourselves what is good for us.

Anussara

Chiang Mai

---------------------------------------------------

Withholding tax on capital will have negative effects

The fact that the no-longer independent Bank of Thailand has slapped a withholding tax on capital inflows is good news! Fuel prices will rise, the stock exchange will plunge! Good news for all those people who supported the junta - the junta that claims to have so much support (but from whom outside Bangkok is not really clear). I sincerely hope that the happy few and influential people in Bangkok, who must have a lot of money and big cars, are hurt badly! It will teach them a lesson in democracy and a lesson in what is best for the country. Not even a junta's assembly will change the feeling that they are not that sincere!

Wassana

Chiang Rai

--------------------------------------------------

Foreign investors given little incentive to trust Thailand

The BOT had time to curb speculation against the baht. With their harsh regulation they shot far over the goal and have done a bad service to the reputation of Thailand! From now on Thailand will be shunned by international investors as a country not to be trusted - as it shows again, it is a place where crooks rule.

Frank Sato

Niigata, Japan

--------------------------------------------------

Why do big-time tax dodgers get only a slap on the wrist?

So, it is reported that Bannapot Damapong, the brother of Pojaman Shinawatra, is willing to pay back the tax he owes to the Revenue Department. Are all other citizens treated in this manner? Instead of being punished for evading taxes, and instead of imposing penalties, how come these so-called champions of "honest mistakes" are still being given leniency? The greatest joke we read in these columns is a statement by the lawyer of the ex-prime minister claiming that at no time did Thaksin or his family evade taxes.

This is a good subject for your cartoonist. The Thai people and government were treated with contempt and impunity by the ex-prime minister and his family and cronies. They deserve the harshest punishment for all their wrongdoings. People will not tolerate any leniency on this matter. Let justice be done quickly, as people expect. Justice delayed is justice denied.

A patriot

Bangkok

---------------------------------------------

Lotteries and telecoms are worthy of a comedy cabaret

The Thaksin Shinawatra government made an honest mistake in authorising the sale of illegal lotteries in 2003, former finance minister Suchart Jaovisidha said.

Sorry, his boss already used that excuse in 2001.

"If you ask me about culpability, then I think the entire Cabinet must be responsible, though no one questioned the legality of the two- and three-digit lotteries at that time," he said. You know, I agree with Suchart on that observation. They can all be tried together. Meanwhile, ICT Minister Sitthichai Pookaiyaudom said he had ordered the state telecom concession owners TOT Plc and CAT Telecom Plc to conduct examinations in all aspects to see if there is any illegality in the concessions. And if any are found they will turn themselves in. I'd never have associated stand-up comedy with the military before. This coup is an education in every respect.

John Francis Lee

Chiang Rai

------------------------------------------------------

Immigration policy lumps all foreigners in the same basket

This is a note addressed mainly to those who think foreign visitors to Thailand fall into two basic categories: backpackers (perceived as spending too little) or regular tourists (perceived as cash cows who are sex tourists and/or self-indulgent vacationers).

A 14-year-old Lao girl came (illegally) to visit a mutual friend near Mae Sai last summer. She's very poor, nearly totally deaf and never learned to sign, and has never been to school. A plea was put online for a hearing aid to be donated. A donor from America came forth, and now the hearing aid is being mailed to the girl, who has since returned to Laos. There are numerous other unsung stories like this. So next time Thai immigration authorities plan another knee-jerk adjustment - to make visa requirements more draconian - perhaps they can consider other types of foreigners in the equation. Whether they know it or not, there are many visitors to Thailand who unceremoniously donate time, money and resources to tangibly do what they think is best to assist those in need.

However, most Thais see only garish foreigners and think they're a bunch of self-gratifying oddities whose value to Thailand is predicated on how much they spend at tourist venues or on dowries. By tightening visa restrictions, Thai authorities are effectively turning many good people away. In contrast, undesirables will probably figure ways to circumvent the regulations.

Ken Albertsen

Chiang Rai