THAI STOCK MARKET MOVES ON RUMORS OF KING'S HEALTH

UNCLAS BANGKOK 002656 STATE FOR EAP/MLS, EEB STATE PASS TO USTR FOR BWEISEL, BKLEIN COMMERCE FOR EAP/MAC/OKSA FOR JKELLY TREASURY FOR OASIA SINGAPORE FOR FINATT BLEIWEIS SENSITIVE SIPDIS E.O. 12958:N/A TAGS: ECON EFIN EINV ETRD PREL TH SUBJECT: THAI STOCK MARKET MOVES ON RUMORS OF KING'S HEALTH REF: A. BANGKOK 2606 ¶B. BANGKOK 2408 ¶C. BANGKOK 2150 ¶1. (SBU) SUMMARY: As widely reported in the local and international press, rumors of the King Bhumibol's ill health drove the Thai stock market into a frenzy for two straight days this week. Combined losses over the two days amounted nearly $13 billion, but the market was able to recover some of the losses in bargain-priced trading on October 16. The Stock Exchange of Thailand (SET) is still up approximately 60 percent from its start this year -- higher than the sterling performances of other bourses in the region. END SUMMARY. ¶2. (SBU) COMMENT: The market jitters and selling frenzy on the trading floor demonstrates just how sensitive investor confidence in Thailand is to news about the King's health. This volatility creates a wealth of opportunities for mischief in the market, particularly for profit-seekers and bargain-hunters. The veracity of rumors is very difficult to track down, but their impact on the market, true or not, is clear. Market Jitters -------------- ¶3. (U) On October 14 and 15, the Stock of Exchange of Thailand posted its first major losses in more than a year, after unverified rumors of the King's worsening health spread on the trader floor and to investment banks in Singapore, Hong Kong, and New York. High-volume selloffs drove the market downwards, leading to a 2.04 percent loss on October 14 and another 5.3 percent on October 15. The market dipped by more than eight percent at one point during the October 15 trading but recovered in a rally before the closing bell. (NOTE: According to the Stock Exchange rules, trading will halt temporarily if the index moves more than 10 percent (in either direction) from the previous day's closing value. END NOTE.) The SET regained some of these losses in October 16 trading, closing 3.5 percent higher than the previous day. ¶4. (U) The two-day frenzy saw high-volume trading, but in contrast to recent trends, foreign investors were the ones selling their shares while local Thais were net buyers. Local finance figures, including the President of the Stock Exchange and the Secretary General of the Securities and Exchange Commission, urged investors, foreign and domestic, to disregard the rumors since there had been no fundamental changes in the Thai economy. Even with the two days of losses, the SET Index remains approximately 60 percent higher than its 2008 year-end level. Rumor-Mongering or Just Gossip? -------------- ¶5. (SBU) It was widely rumored that a group of high net worth Thai investors initiated the latest round of gossip themselves in a profit-seeking scheme, temporarily selling off large volumes of their own stocks at high prices before buying back their shares when the market fell. Editorials in October 16 local newspapers circulated this gossip, too: the Thai language daily Naew Na and the English language daily The Nation blamed the market's losses on "bad people" intent on hurting the nation and the monarchy for the sake of politics and/or money. ¶6. (SBU) In hopes of dispelling the rumors, the Royal Household Bureau continues to issue daily pronouncements on the King's health, stating that he is eating regularly now and recuperating. The Thai language Matichon splashed "King Is Eating More" across its October 16 headlines on its front page, rather than placing the Royal Household's press release in a small box on the front page as it and all other papers have been doing since the hospitalization began. As if to separate the issue of the stock market decline with that of the King's health, Matichon placed the stock market story in the business section, rather than the front pages. JOHN