SIAM Commercial Bank's announcement on Friday of a tripling of its capital through the issue of four billion shares hugely disappointed the stock market, where fears over the recapitalisation hammered the bank's stock, reducing its value by almost 25 per cent. The SET index also shed another 2.5 per cent to close at an 11-year low.

Analysts questioned the timing and the ability of the fourth largest commercial bank to recapitalise successfully at a time when the stock market, which fell 8.31 points to 325.59 on Friday, is extremely bearish with the deteriorating Thai economy and Asia in general facing a second wave of the financial crisis.

''Clearly, Thai Farmers Bank and Bangkok Bank are the survivors because they have successfully raised capital. But do investors really need a third bank? I doubt it,'' said an investment analyst from a European brokerage.

Following its board of directors' meeting on Thursday, Siam Commercial Bank announced that it would raise capital by issuing between 3-4 billion new shares. The bank did not give details of this offering or the premium it expects to get, saying only that a 3 billion share issue will be placed privately and that the allotment can be made one or several times.

In practice, however, the bank plans to carve up its existing shares of Bt10 billion that have not yet been sold to Bt5.88 billion, so that it can issue new common shares of 3.41 billion to a total of 4 billion shares. The capital increase will be largely sold through a private placement but part of the shares will be set aside for future warrant exercises.

MR Chatu Mongol Sonakul, the Bank of Thailand governor, said however that he believed Siam Commercial Bank would be able to successfully sell its shares to investors. ''The bank should be able to raise capital even at this huge amount because it has informed us that there are several investors -- not solely Sanwa Bank -- who are interested in buying into the bank,'' he said.

At Bt20.75 a share on Friday, Siam Commercial Bank was trading at about 56 per cent below its 1997 year-end price of Bt48. Thai Farmers Bank mustered Bt88 a share from its 376 million private offering in late March, while Bangkok Bank followed suit in April to garner Bt93 a share from its private placement of 440 million shares.

That appears to have left little room for Siam Commercial Bank to go into the international capital markets for a private placement, aside from its decision to seek a strategic partner to bail it out, analysts said. ''Going into the market to raise capital this time can only mean that the bank will get a sharp discount for its shares,'' the analyst from the European stock-broking house said.

A stock analyst from Capital Nomura Securities said foreign investors' interest in Siam Commercial Bank's stocks will be very limited as evidenced in an absence of price differential between its stocks on the local board and the alien board. At the same time, Thai Farmers Bank and Bangkok Bank still command a foreign premium of about 30 per cent, the analyst said.

Complicating the Thai banks' recapitalisation plans is a weakening of the local currency, which has broken the Bt40 mark against the US dollar for the first time in six weeks. Analysts warned that the government's focus on stabilising the baht is taking its toll on the economy, which is expected to contract sharply in July.

Standard & Poor's, the US rating agency, said recently that it expects non-performing loans in the Thai banking system to reach 35 per cent this year and that the banking system will need at least US$20 billion (Bt800 billion) to bring it back to the level where it can proceed with normal lending.

Other bank stocks also took a beating, with Thai Farmers Bank losing Bt6.25 to Bt46.75, Bangkok Bank shedding Bt2.50 to Bt62, and Krung Thai Bank also falling Bt0.90 to Bt6.40.

There were confusing reports that Siam Commercial Bank might use its proceeds from the capital increase to shore up the operations of its finance subsidiaries, such as Dhana Siam Finance & Securities Plc, Book Club Finance & Securities Plc and Siam Sanwa Industrial Credit Plc, which are badly in need of fresh capital.

But the analyst from Capital Nomura Securities said that if Siam Commercial Bank intends to use the proceeds from its capital increase to support its subsidiaries, it will not be able to afford to do so with a recapitalisation of just Bt40 billion.