Democrat Party member Korn Chatikavanij urged the BOT to immediately reverse the action.

Korn said: "The measure is damaging the capital market. The Bank of Thailand should immediately reverse this policy, because no investors will want to spend Bt100 just to have Bt30 withheld and then get only Bt90 back if they want to remit the money in less than one year."

Starting yesterday, financial institutions will be required to withhold 30 per cent of foreign currencies bought or exchanged against the baht, except those related to exports.

Korn said the damage caused by the measures could be overwhelming. Besides, there's a rule within some foreign financial institutions that they cannot invest in countries with capital controls.

He said the capital-control measure in Chile damaged the market there for 10 years, while the impact on Malaysia's market lasted three to four years because of the introduction of the capital-control measures.

He said the BOT should implement separate measures to deal with money and financial capital markets.

Nasu Chansom, head equity fund manager of Ayudhya Fund Management said: "With this measure, the BOT has perfectly fulfilled the market risk. This is a drastic action that doesn't carefully consider the consequences. Our good performance so far this year collapsed in one day. Our portfolio value was depreciated by billions of baht."

He said yesterday there was no unit redemption. On the other hand, there were a number of purchase orders. He said the company would like to wait and see - so it neither bought nor sold any units yesterday.

Another fund manager, who asked to remain anonymous, slammed the decision saying the BOT measure lacked prudent consideration.

"The BOT wanted to solve one problem but the method unexpectedly forced the market to crash. The strong baht appreciation was driven by the money market but this measure affected the overall capital market," he said.

"This method exposed the fact that Thailand has more regulatory problems. Everything is so uncertain. I'm not sure whether the confidence to invest in Thailand would be redeemed any time soon," he added.

Chatri Sophonpanich chairman of Bangkok Bank Ltd (BBL) said the BOT has no better alternative to protect against baht speculation. Otherwise the baht would strengthen further and it might be similar to the baht attack before the country's financial crisis in 1997.

"The BOT's measure is necessary. If they don't do it, it will lead to a problem. Though the measure will intercept foreign capital inflow, we need inflow of money for long-term investment not for speculation," he said.

Chatri said it was too soon to assess the measure. People should wait to see what happens over the next few days. However, it is acceptable that the baht was weakened by around three to four per cent yesterday, and the BBL share price plunged to Bt100. The bank's share price fall was mainly a result of sale by foreign funds.

Khan Prachuabmoh, president of Government Housing Bank, said the BOT measure was extreme and the reaction was quite strong. The central bank should gradually release the measures step by step. The measure, however, is expected to be temporary, he said. Teerana Bhongmakapat, an economist at Chulalongkorn University, urged the central bank to cut the reserve requirement of 30 per cent on capital inflows to around three to five per cent to lessen the impact.