The central bank's assistant governor Nitaya Pibulratanagit said although the withholding reserve requirement would largely discourage foreign investment in stocks, some investors had brought their money into the bourse incessantly.

"There has been capital flowing out after the measure was introduced but there have also been capital inflows in the stock market at an amount higher than the outflows. The amount of net inflows is not tiny," she said.

The net inflows in portfolio investment partly caused the baht to appreciate. The currency hit a nine-year high last month at Bt34.65 against the US dollar.

Aside from exporters, two Thai banks have reportedly been accused of baht speculation, prompting the central bank to request banks to adjust their net foreign positions to be the same as at the end of last year.

Nitaya said that foreign investors mainly wanted to seek capital gains and returns from well-performing Thai listed companies, although they partly wanted to reap gains from expectation of the baht's strength.

She was optimistic that capital would continue to flow into the stock market, particularly when the economic outlook was positive with 4 per cent growth and low inflation.

The central bank said US$608 million (Bt21.23 billion) worth of net inflows were marked in portfolio investment in the first month of the year, slightly lower than $782 million last December. Most inflows were booked in the industrial sector, followed by the real estate and trade sectors.

The assistant governor believes that Thai investors will increasingly bring out their money for direct investment abroad.

Nitaya said the baht had been stable for weeks.

Anoma Srisukkasem

The Nation