Thailand's financial market (#289, Topic B, F)

A major piece of news this morning, repeatedly stated as such by several anchors at CNBC, is Thailand's invoking a 30% withholding tax on foreign "investments"; this move resulted in a 15% decline in its stock market for the day (12/19/06). Later, after financial markets in Thailand closed, presumably at 5 pm or so Thai time, the government said to have "reversed itself." The effect of this "reversal", at the time of this broadcast, is yet to develop. (Thai time is 12 or so hours ahead of EST; at 9 am EST (about 9 pm Thai time), the Thai market is closed for the day while the NYSE is yet to open.) So, there are wild speculations. One commentator obliquely referred to the 1997 crisis, which originated in Thai's currency market, that "brought down a hedge fund" -- its name is not mentioned, but it is the famous Long-Term Capital Management case. That crisis put the free-market capitalism to test (result: F; the US government agencies had to bail it out.) At 5 pm EST, Larry Ludlow, a champion of free-market capitalism (he signing-on message, at 5 over CNBC, is always words to this effect), is less kind. He bluntly asks his panelists whether these "clowns" -- meaning Nobel laureates in Economics and world-class currency speculators of the LTCM fame -- had anything to do with Thailand's 2006 move. Every one answers in the negative. In my assessment, the withh0lding tax is not aimed at investments but at speculations; not directed at long-term investors but at currency speculators; and the "reversal" is merely a clarification of its intended target. Who needs these hot-shot currency speculators who could, single-handedly, damage not only the currency of a country, but currencies of a region? The recent high-powered US delegation to China, hoping China would "open" her financial markets and allow her currency more flexibility, is merely a prelude to introducing this type of drama to China. The west wants nothing better than seeing China in turmoil. Luckily, China in the 21st century is not the same push-over in earlier centuries. Nowadays, China has done precisely what Thailand proposes to do: "we welcome your capital investment; please leave currency speculators at your own door." We'll see whether the west sees the difference between investment used in the conventional sense and used as a camouflage for speculation.