Thailand shares fall as protestors gather

Bank of Thailand cuts interest rates by a quarter point

MarketWatch

By Myra P. Saefong & Chris Oliver, MarketWatch
April 8, 2009

TOKYO (MarketWatch) -- Thailand shares headed south Wednesday as anti-government protestors gathered in the tens of thousands and the nation's prime minister warned that he would not let the rally become a riot, implying the use of force.

The Thai market also digested the latest move by the Bank of Thailand, which announced a cut late Wednesday afternoon in its benchmark interest rate by a quarter point to 1.25%.

Police estimated that about 30,000 supporters of former Prime Minister Thaksin Shinawatra gathered outside the main government offices in the capital following a sit-in over the last two weeks, according to a report from Agence France-Presse.

A day earlier, protestors had attacked a motorcade for Prime Minister Abhisit Vejjajiva, head of the four-month-old government.

Against this backdrop, Thailand's SET Index slipped 0.6% lower to 440.13 in late afternoon trading Wednesday.

Leaders of the member states for the Association of Southeast Asian Nations are set to meet in Pattaya, Thailand, on April 10 to 12. The meeting will also include non-member, dialogue partners China, Japan, the Republic of Korea, India, Australia and New Zealand.

Bank of Thailand cuts rates
Meanwhile, the central bank's interest-rate cut didn't quite meet with market expectations.

It was on the lower side of forecasts with some economists expecting more aggressive action from the central bank amid negative consumer-price-index figures for March, rising political tension and signs the economy is worsening.

A majority of economists polled by Dow Jones Newswires were forecasting the central bank would reduce rates by half a percentage point.

The rate reduction is the fourth in five months, and brings the cumulative rate reductions since December to 2.5 percentage points.

"With growth at risk, the central bank is likely to continue cutting, especially as political paralysis is preventing an aggressive fiscal response to the slowdown," Win Thin, a senior currency strategist at Brown Brothers Harriman & Co., wrote in a recent note to clients, ahead of the announcement.

However, some economists cautioned the central bank may be reluctant to implement substantive interest-rate cuts as further reductions hurt income from cash deposits and lead to dampened purchasing power.

Interest rates have fallen to historical lows on fixed deposits and savings accounts.