Quotes of the Day

Economists say that one of the pillars of efficient markets is the free flow of information. But what happens when information floating around is false? In Thailand, stock-market regulators have decided that's bad for the market—and they're threatening punishment for spreading rumors in the financial community. New rules set down by Thailand's Securities and Exchange Commission (SEC) say stock analysts who issue "negative reports" or pass along rumors will face up to $12,000 in fines and two years of imprisonment. In addition, the commission has established guidelines for securities houses limiting who can speak to the media and what they can say. "We have a problem with analysts spreading rumors," says SEC chief Thirachai Phuvanat-naranubala.

The immediate cause of the crackdown was a recent spate of reports that the government planned to unload some of its holdings in Krung Thai and Siam City banks, which caused their share prices to plummet—and prompted Thirachai to pointedly deny the reports and announce the new restrictions at a hastily convened press conference. That incident was just the latest example of regulators trying to control an unruly market. With a total capitalization of only $121 billion—far less than half of Microsoft's current market cap of $295 billion—the Stock Exchange of Thailand (SET) is dominated by small investors who spook as easily as a school of herring, causing volatile price fluctuations. During a roaring market last year (the Thai market's 116% gain in 2003 was tops among the world's exchanges), regulators tried to put the brakes on rampant speculation by tightening day-trading rules.

Thirachai, a strong proponent of corporate governance and transparency, insists he isn't trying to stop the free flow of information. He says he is moving to prevent individuals from manipulating the market, driving share prices down so that they can later be bought at bargain rates. "I object to fluctuations caused by false rumors," Thirachai says. But with the SET index down this year by nearly 25%, some fear the attempt to muzzle market buzz will only scare off institutional investors and make matters worse. "The problem is that information, the media, is too tightly controlled by the government," says Sompop Manarungsan, an economics professor at Chulalongkorn University in Bangkok, "so rumor fills the vacuum." Information yearns to be free.

• Robert Horn
• Thai regulators target market analysts, who they blame for the stock market's tumble