A slump of nearly 9 per cent on the Chinese stock market in Shanghai on Tuesday was the trigger for the global freefall.

The benchmark Philippine Stock Exchange Index fell 263.84 points, or 7.9 per cent; the Nikkei 225 ended down 515.80 points, or 2.9 per cent, marking its biggest points decline since June 13, 2006; the Straits Times Index lost 5.57 per cent; and the KOSPI dropped 2.56 per cent.

In the United States, the Dow Jones Industrial Average closed down 3.3 per cent, the S&P 500 fell 3.4 per cent and the Nasdaq was down 3.9 per cent, its seventh-worst points loss ever.

Apart from Shanghai's biggest decline in a decade, a fall in US durable-goods data also dampened the US market. Thai stocks dropped sharply at the opening bell and headed south further to the day's trough at 665.04 before rebounding dramatically to close at 667.13, a fall of one per cent. Turnover was moderate at Bt19.9 billion.

Foreign investors were net sellers in Thai shares yesterday, with a net position of Bt11.97 billion.

Bangkok Bank fell 1.8 per cent to Bt109, PTT slumped 1.89 per cent to Bt208 and Shin Corp was 7.78 per cent off at Bt24.90.

Stock Exchange of Thailand president Patareeya Benjapolchai said the global tumble had delivered the hardest blow to the Thai market, while Pridiyathorn's resignation would have a short-lived impact on the bourse.

"We have to keep an eye on who will replace him," she said.

JP Morgan Securities (Thailand) president Macro Sucharitkul agreed with Patareeya that the sharp decline in stock markets around the world had prompted the sharp fall in the Thai market.

He said foreign investors had taken profits following the recent historic high in many stock markets to mitigate their risks.

"I believe that Pridiyathorn's resignation was another factor that pressured the Thai market. However, the tumble in the Thai bourse is not so much because of the strong economic fundamentals. Foreign investors remain confident in the Thai market and stock prices are still cheap compared with other markets in the region," he said.

However, the choice of Pridiyathorn's replacement as finance minister would dictate the market's direction, he added.

Veerachai Krongsamsi, an investment strategist at Far East Securities, said Pridiyathorn's announcement had worsened market sentiment.

KGI Securities (Thailand) vice president Adisak Kammool said the local market had declined to a lesser degree than other countries because energy stocks have the largest weighting in the Thai bourse.

Buying in stocks paying high dividends also helped prop up the market, he said.

Meanwhile, Rasa Development decided to indefinitely postpone its initial public offering - scheduled for today and tomorrow - following the sharp slump in the Thai market and political uncertainty.