Tax dispute in Cyprus drags Thai stocks down 1.5 per cent
Concerns over developments in Cyprus caused a major hiccup for the Thai bourse and global markets yesterday.
The Stock Exchange of Thailand index was in a tailspin. After briefly surpassing 1,601.34 points - the highest level in 19 years - the index ended the day down 23.40 points, or 1.47 per cent lower. The index closed at 1,568.25 points on turnover of Bt76 billion.
On Monday, an unprecedented plan to tax bank deposits in Cyprus spurred US$500 billion (Bt15 trillion) in global equity losses, amid fears the euro-zone debt crisis could flare up again and similar measures could be introduced in other troubled economies in the future.
On Monday, Thai shares lost only 0.41 per cent thanks to individual investors, who expected a further rally despite the "hiccup". Yesterday, they were net-sellers, with net sells of Bt1.3 billion.
Cypriot lawmakers were due to make a decision late yesterday, Bangkok time, on whether to pass a law to enforce the tax. The decision was not available at the time the paper went to press.
For the first time since the euro-zone crisis started, European and International Monetary Fund creditors agreed with a cash-strapped EU member government forcing ordinary depositors to help pay as part of a bailout deal. In return for the 10-billion euro (Bt379.69 billion) bailout to avoid bankruptcy, Cyprus needs to raise 5.8 billion euros from deposit taxes.
The Cypriot Parliament delayed voting from Monday after an uproar from depositors. Yesterday European finance ministers were firm on their demand, but suggested sparing small-scale savers who have under 100,000 euros in their accounts.
The original agreement provides for Cyprus to tax deposits above 100,000 euros at 9.9 per cent and those under 100,000 at 6.75 per cent.
Cyprus is the fifth euro-zone country to seek a bailout since 2010. A rejection of the package could see the country go bankrupt and possibly leave the euro zone.