The SET Index has rallied almost 3 per cent as foreign investors bought shares with a net position of Bt7.35 billion over the past two days.

The downward interest-rate trend and the government's approval for building the five mass-transit routes have revitalised the stock market, SET president Patareeya Benjapolchai said. Besides, the government's policy to extend the corporate income tax reduction to newly listed companies has also given the market a boost, she said.

Josef Ackerman, chairman of Deutsche Bank's executive committee, was reported as saying yesterday that he was in favour of the 30-per-cent capital reserve requirement.

He said after a meeting with Prime Minister General Surayud Chulanont that the policy had blocked massive inflows and speculation.

He warned that excessive speculation could cause an economic crisis, which would affect not only Thailand but other countries in the region and elsewhere around the world.

He was quoted by the government spokesman as saying that the reserve policy was a way to restore stability to the capital market.

Unlike Vijit's optimistic comment, the Securities Analyst Association said analysts had reached a consensus to lower the SET target to 722 points this year, from 799 when they surveyed members in October.

Among major concerns for the analysts are the Bank of Thailand's capital-control measure, the violence in the deep South, political uncertainties, and doubts over PTT's future after a consumer group filed a legal action to delist

the national oil and gas stock from the bourse.

Bualuang Securities deputy managing director Padermphop Songkhroh said the SET Index had reached its highest point, and he foresaw the index moving in a narrow range as investors await news on new investment projects.

"Investors are adopting a wait-and-see attitude before the Bank of Thailand's meeting on interest rates this month," he said. "If the central bank cuts the policy rate by 25 basis points, the index could rise further. If there is no rate cut, many investors could sell off their shares to make profits."

Amid the unclear economic picture, Deputy Finance Minister Sommai Phasee is optimistic the economy will expand 5 per cent as expected, due to the downward interest-rate trend.

He said the government also had the policies to protect the export sector and to boost domestic spending amid the expectation that oil prices will not increase. He also hopes the government's mass-transit investment will raise investor confidence and spur new investment.

This month, the Finance Ministry is scheduled to review the forecast for growth in gross domestic growth for the year. The Bank of Thailand last month slashed its growth forecast by half a percentage point to 4-5 per cent.

Next Tuesday, the ministry will also propose to the Cabinet extension of the tax privileges to listed companies, in order

to draw new listings and boost investor sentiment amid sluggish market conditions.

However, Capital Nomura Securities said the recent euphoria in the stock market could be ascribed to Finance Minister MR Pridiyathorn Devakula's recent comment that the central bank has room for further rate cuts, and investors' asset allocation shifting from bonds to the equity market.

The broker said the upside in the Thai stock market was now limited, following a strong gain from 650 points when the Monetary Policy Committee cut its key policy rate in January.

Moreover, the broker expects trading liquidity to be limited ahead of the Chinese New Year festival, as most regional indices are closed for the holiday.