Foreign property transactions came to a standstill after Black Tuesday (December 19), when the Bank of Thailand triggered the worst stock market crash in its history, wiping Bt850 billion in less than four hours of trading.

By imposing a capital-control measure, the bank sparked a staggering sell-off that spilled onto regional bourses. For the second time since 1997, Thailand became Asia's pariah market.

The fiasco was so overwhelmingly that many bankers, investors and property agencies were soon pounding on the doors of relevant officials fearing a total collapse.

Property agency CB Richard Ellis was one of the first stakeholders to seek clarification. It knew the capital curbs would not only punish foreign buyers but the curbs had potential to sink the housing sector along with everything else.

Somehow, amid the chaos, wrought not by hedge funds or reckless traders, but central bankers, sensibility returned.

"The Bank of Thailand issued an announcement on its website on December 21 stating that property, including land and condominiums, is exempt from the reserve requirement on short-term capital inflows," CB Richard Ellis promptly informed customers two days after the catastrophe.

Foreign purchasers of condominiums can now bring funds into Thailand to purchase condominiums without being subjected to penalties, it said.

"According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds," it added.

Aliwassa Pathnadabutr, managing director of CB Richard Ellis Thailand said, "We welcome this clarification, which means that foreign property purchasers are not affected by the new regulations. We believe that this will reassure existing and potential property purchasers."

But for many buyers, the tendency was to hold off for the time being, as the whole scenario seemed frightening.

Property firms will now need to do much to calm jagged nerves and convince buyers that Thailand is still a safe place to park cash.

The next few months will be crucial to regain the confidence and shattered faith of investors.

The hope is local financial leaders have learned something from the fallout. It is said that those who fail to learn from their mistakes are doomed to repeat them.

Indeed, Black Tuesday is very much a replay of another central bank blunder 10 years ago, which sparked the 1997 Asian financial crisis.

This time, instead of defending the baht, bankers decided to prop up the US dollar, the only foreign currency losing ground against the baht. Their reason? To bail out exporters. Why they did not leave that job to the commerce ministry remains a mystery.

Obviously 1997 has taught them little. There is still the thinking that central banks are bigger than free markets, and that markets are so inefficient they need intervention.

The truth is had the bank done nothing, the baht would have eventually dropped back when it clearly seems overvalued. Just like when the baht fell from Bt58 to the dollar in late 1997, it prompted buying which quickly brought it up to Bt35 to the dollar by mid 1998. All the central bank had to do was next to zero.

Itthi C Tan

The Nation