AUCKLAND - The rumours last week that Yingluck Shinawatra's premiership was under threat caused the sharp fall in Thai stocks last week, said Suranand Vejjajiva, the secretary-general to the Prime Minister's Office.
But Mr Suranand said the rumours - including ones suggesting that Ms Yingluck was set to resign; a substitute premier was being prepared; and a coup was imminent - were not true.
Several rumours were found to have been started by Stock Exchange of Thailand (SET) sources, he said.
It has been detrimental to both domestic and foreign investors as the rumours destabilised the country's economy and politics, Mr Suranand said in New Zealand, where he accompanied the premier on an official visit.
The SET slumped by 7.46 per cent last week, the biggest weekly loss since October 2008.
Mr Suranand said the baht appreciation caused the stock volatility and then the rumours exacerbated the instability.
"The stocks have plunged in an unusual manner because of the rumours. The move was not correspondent with the foundations of the stocks, companies' performance and the country's economy," he said.
Mr Suranand said he was unable to point out when the stocks will recover and the government was not obliged to interfere in the market.
"In April, some movements would spark more rumours of political uncertainty, leading the public to believe there is an intense political conflict," Mr Suranand said.
Ms Yingluck also expressed concern over the sharp drop of the index, saying the market's volatility resulted from the influx of foreign capital to Thailand.
The fluctuations in foreign markets have also affected Thai stocks, she said in New Zealand Saturday.
The premier also called on investors to put their money in the stocks of the companies which have strong foundations rather than focusing on speculation.
Ms Yingluck declined to comment when she was asked whether the market sell-off was undertaken to unsettle the government.
She left New Zealand for Papua New Guinea Saturday.