Thai Markets: Fear Of Another Asian Contagion?

AP

Thailand

As we’ve been telling you--a dramatic turn of events in Asia overnight sent Thailand's stock market plunging more than 15%. That country's government imposed capital controls in an effort to curb appreciation of the Thai currency--the baht.

The market reaction was so brutal, that just a few hours ago—Thailand’s government started to back-peddle on the regulations. Still, the situation left some wondering if we were in for another Asian Contagion – the financial crisis of 1997.

CNBC’s Michelle Caruso-Cabrera examined the implications with Sam Stanley of Halo Financial.

First some background: Late Monday the Bank of Thailand announced its toughest measures yet to clamp down on speculative inflows that have lifted the the baht, to a nine-year high.

The measures said that starting Tuesday, all banks were required to hold in reserve for one year--30 percent of capital inflows.

Also, foreign investors must pay a 10 percent penalty unless they keep funds in the country for a year.

Sam Stanley said, “It’s basically a tax being levied on anyone not willing to invest for a year – it’s the kind of thing that scares away investors.”

“This is different than what happened in 1997 – we have stability in the Asian markets. But, you’ll probably see some spill over into some other currencies.”

Around Asia, markets took a beating. Indonesia's Jakarta Composite Index fell by 2.9 percent, while the Kuala Lumpur Composite Index lost 2 percent.

Hong Kong's Hang Seng Index fell 1.2 percent and the Bombay Stock Exchange's 30-stock Sensitive Index, or Sensex, dropped 2.5 percent

As we said earlier, the Thai government has reversed course – and now said it would lift controls on foreign investment in stocks.