Brazil's defacto devaluation of its real currency by about 8 per cent on Wednesday produced a global market shock.

But markets in Thailand were also eyeing debt problems revealed by some Chinese firms this week and their potential for negative impact on the yuan, analysts said.

"Today it (Brazil news) had limited impact. The Hong Kong Hang Seng Stock index fell but not so badly as expected this morning. I don't think it will have a Thailand," said Satian Tantanasarit, head of treasury at Thai Danu Bank Plc.

"But if this Brazil issue drags on and hangs over the market, there will be more negative than positive impact,"analysts said.

The Thai baht at mid-day was under some pressure on Thursday and quoted weaker at 36.85/36.95 versus 36.36/36.46 per dollar late on Wednesday, dealers said. Some saw it being capped at 37 a dollar.

Bank of Thailand governor Chatu Mongol Sonakul put on a brave face despite the Brazil and China news.

He said the central bank would allow the baht to move with market forces, despite uncertainty arising from Brazil. "We will let the baht move with market forces being. We cannot resist external factors," he told reporters.

Thailand, which is riding out its worst economic crisis in decades, has been trying hard to put recovery via tough financial reforms and restructuring of its severe debt problems.

The International Monetary Fund, which arranged a $17.2-billion bailout package for the country in August 1997, is helping to guide the country out of recession.

Thailand has been cited as a star pupil of the IMF with good prospects for recovery.

"Let's keep our fingers crossed and hope the Brazil issue will not rise above the occasion and serve as an external shock for Thailand just as we are moving nicely toward recovery," said Piti Sithi-Amnuai, executive vice chairman of Bangkok Bank Plc.

"We hope that the US markets and banks will not be too much disturbed by this and can contain it," he said. "If this gets intertwined with the Chinese firms' debt problems then there is a danger that it could become hot to handle for our region."

Another analyst with a regional brokerage, said that while Thailand needed to be wary about the potential danger of the Brazil and China woes, conventional wisdom had it that some countries in Asia were on the road to eventual recovery.

"While the Brazil news will make it more difficult for Thailand to go and make a global bond issue at this time, there could be capital flight from Latin America into Asia," he said.

"If it becomes clear the situation is only limited to Brazil it could be good for Asia. If foreign investors underweight Latin America in their emerging market portfolios, they could overweight Asia," he added.