Buoyed by a global liquidity drive and a rise in the New York stock market, which closed above 11,000 on Monday for the first time, the Thai stock exchange led the way in the Asian rally by rising more than 10 per cent to close at 505.75, a gain of 46.40 points. The Jakarta market also set a 13-month high yesterday.

''We're seeing a start of a bull run in the first round. It should be sustainable over the next two weeks before a correction comes about,'' said an investment analyst at a foreign brokerage house.

Over the past two weeks, the Thai stock market, buoyed by heavy foreign institutional buying, has been climbing steadily, rising by about 27 per cent from 402.54 on April 16 to reach 511.53 at one point yesterday. The rally appears to have reversed the full five-year bear cycle, which started in April 1994 when the Thai market reached more than 1,700 before crashing with the collapse of the bubble economy to 214 in August last year.

''I think Moody's adjustment of Thailand's long-term sovereign-debt rating from negative to positive reflects the fact that the Thai economy will be rising in April and May. It also shows that the economy bottomed out in February,'' said the analyst.

The baht, buoyed by an inflow of capital, also strengthened against the US dollar to reverse recent fears that it might have to depreciate further to boost Thai exports. It was quoted at Bt36.80/Bt36.90 late yesterday against Bt37.18/Bt37.23 on Friday.

Foreign institutional investors have jumped on the buy-Asia bandwagon by pouring money into cash-strapped Asian companies in the belief that the crisis has bottomed out. By doing so they are also trying to diversify their portfolios from the overheated US stocks.

The Hong Kong Investment Funds said in its survey yesterday that more investment fund money had come into Asia than had gone out in March for the first time this year, according to an Agence France-Presse report.

''We have seen more investor interest in single Asian sectors, in particular in funds investing in Japan, [South] Korea and Thailand,'' association chairman Desmond Chan was quoted as saying.

But he warned against hopes for an early large-scale return to regional investment funds by foreign investors ''because most Asian economies are still very much in a restructuring process, and in the short run investors probably would still be selective rather than take up Asian funds across the board''.

There were also two significant warnings over the excessive market euphoria made yesterday by Stanley Fischer, the first deputy managing director of the International Monetary Fund, and Pakorn Malakul na Ayudhya, the secretary-general of the Securities and Exchange Commission.

Speaking from Washington DC through a teleconference in Hong Kong and Singapore, Fischer warned about the risk of complacency over the tough road of financial and corporate-sector reform in South Korea and Thailand as the sense of the crisis was lifted by renewed optimism.

''Structural reforms in the financial and corporate sectors starting in Korea and Thailand could falter as a result of the lifting of the sense of crisis and a feeling of complacency about the crisis. It is a very real concern,'' he said.

He repeated his message that long-term growth could not be sustained without deepening structural reforms, the lack of which started the economic crisis in the first place.

Pakorn of the Thai SEC also warned local punters, several of whom have reportedly placed orders for new luxury cars from their recent profits, to be more wary about the risks pertaining to market volatility.

''We have been keeping a close watch on the market as regulator of the capital market to prevent excessive speculation, which might cause damage later,'' he said.

However, he welcomed a return of the foreign investors to the Thai market, the presence of whom has lifted sentiment and reflected growing confidence in the prospects of the Thai economy.