The Stock Exchange of Thailand (SET) composite index rose 0.25 per cent, or 1.63 points, to 648.32, with total turnover of Bt11.96 billion, while the blue-chip SET 50 Index increased 1.95 points to 446.22.

Dealers said the Thai market rose in line with regional gains, but the broader market was kept in check, because of political uncertainty over the leadership of caretaker Prime Minister Thaksin Shinawatra, who has been accused of corruption.

Caretaker Finance Minister Thanong Bidaya said yesterday local political uncertainty had affected economic conditions, particularly investment and consumption, as foreign investors decided the caretaker government would not be able to run the administration to its full capability.

He said the Thai stock market dropped sharply on Wednesday because of capital outflow to the US, where the government had adjusted its strategy by raising rates in a bid to solve global imbalances. He believes the capital outflow caused by foreign investors' portfolio rearrangements could continue for another three to six months.

"The US is using rate increases as its strategy for solving its owns problems, particularly inflation and high consumption in the property market," said Thanong.

Meanwhile, Asian stocks posted solid gains yesterday, helped by Wall Street's advance overnight, as investors resigned themselves to another US rate hike at the end of the month and looked to trim recent losses.

Dealers said the brutal and costly roller-coaster ride of the past few weeks had been driven by deep uncertainty over how far central banks, and especially the US Federal Reserve, might raise rates to head off inflation.

All eyes were thus on the US May consumer-inflation figures issued on Wednesday, but while showing an expected pick-up in prices, they also removed any doubt the Fed would hike rates another quarter point on June 29, allowing stocks some unexpected leeway.

Wall Street's resulting 1.03-per-cent rebound was enough to get Asian markets off to a good start yesterday, with investors grateful for a chance to recover some lost ground, even if trade remained cautious.

In Hong Kong, which was up 1.23 per cent, South Ocean Management president Brook McConnel said bargain hunters and Wall Street provided support.

But he said that despite the gains, many investors remained cautious, given warnings from US Federal Reserve officials about the risk of inflation and the need to raise interest rates further.

"My feeling is the market hasn't reached its bottom yet - investor sentiment is still far from firm, and any major adverse news could trigger another big fall," said McConnel.

In Sydney, which rose 0.39 per cent, dealers said the overall upward trend in the region's most resilient market remained intact against the backdrop of a strong and thriving economy.

That confidence was lacking in Tokyo, which was up 1.13 per cent, as gains were capped by concerns that in addition to a rate hike this month, the Federal Reserve may follow suit in August, prolonging the agony across the summer, when markets can be vulnerable in thinner trade.

In other markets, Seoul was down 0.19 per cent, and Taipei shed 0.66 per cent. Indian share prices rose 6.89 per cent in a record single-day gain, while the Malaysian bourse closed down 0.76 per cent. Singapore gained 0.95 per cent, while Hong Kong's stock market rose 1.23 per cent. Indonesia's equity bourse rose 0.6 per cent.

The Nation

Agence France-Presse