CAPITAL CONTROLS ??? THREAT OF A REPEAT OF THE ASIAN FINANCIAL CRISIS IN 1997/98 ???

In June 1997,currency speculators attacked Thai baht causing its currency to dip by more than 35%...during 1997/98 Asian financial crisis.
Malaysia's central bank, BNM (Bank Negara Malaysia) in reaction to the regional currency crisis, imposed a series of capital control in Sept 1998 which shocked the financial/currency markets.
This drastic measure,according to BNM was to ward off currency speculators, after the Malaysian Ringgit (RM) fell (from RM2.50 - prior to the crisis) against the US dollar. BNM on 2.9.98 pegged the local currency at RM3.80 to the US dollar.
However, in June 2005 (after more than 6 years) BNM dismantled almost all of the capital controls, including removing the ringgit 3.80 peg against the US dollar.

Two days ago,Thailand's central bank 'shocked' the Asian financial and currency markets again ! - - by unexpectedly imposed restrictions on capital inflows into that country, to curb speculation on the baht !!!
This anti-speculation (of currency) move not only sent jitters in several Asian currency/money markets, but also weaken Asian bourses.
It triggered Thailand's stock market to plunge 108 points (almost 15%)- biggest one-day fall since 1990 ! - Losses ? - more than US$20 billion (or RM 72 billion)!
The Malaysian stock market fell as much as 35 points - its largest one-day dip in 5 years, before closing 21 points lower.
BNM - Malaysia central bank assured the investors that Malaysia is not going to follow Thailand, to impose capital controls. BNM said that they are in fact,, still on the mode of liberalising Malaysia's financial system progressively, in order to attract more foreign investments into the country.

THE SAID CONTROLS :-
- ALL THAILAND'S FINANCIAL INSTITUTIONS ARE REQUIRED TO WITHHOLD 30% OF FOREIGN CURRENCIES BOUGHT OR EXCHANGED AGAINST THE THAI BAHT
- IMPOSITION OF A 10% PENALTY FOR WITHDRAWAL OF FOREIGN FUNDS THAT HAD BEEN IN THAILAND FOR LESS THAN A YEAR.
EXEMPTIONS :-
- THOSE FOREIGN EXCHANGE TRANSACTIONS RELATED TO COMMERCIAL TRADES IN GOODS AND SERVICES OR REPATRIATION OF INVESTMENTS ABROAD BY RESIDENTS ARE EXEMPTED.
- FOREIGN EXCHANGED TRANSACTIONS WHICH HAVE BEEN TRADED PRIOR TO THE CAPITAL CONTROLS IMPOSED, ARE ALSO EXEMPTED FROM THE 'RESERVE REQUIREMENT ON SHORT-TERM CAPITAL INFLOW'.

LATEST !!!
THAILAND'S FINANCE MINISTER,SUBSEQUENTLY (one day after the control) EASED CURRENCY CONTROLS ON FOREIGN INVESTMENTS INTO THE STOCK MARKET, AFTER 15% SHARE PLUNGE CAUSED BY EARLIER IMPOSITION OF RESTRICTIONS.

COMMENTS :
Given the fact that Malaysia's fundamentals still remained strong and BNM's policy of gradual and sequenced liberalisation of the financial/currency markets, it is unlikely Malaysia will impose another capital controls.