Share prices in Thailand rebounded 10% on Wednesday, after the biggest market fall in 16 years on Tuesday - when trading had to be briefly suspended.
There have been worries about overseas speculation on the baht
That fall was a reaction to new central bank rules curbing foreign investment and aimed at stemming the surge in value of Thailand's currency, the baht.
After the market turmoil, which saw the SET index fall 15%, some restrictions on foreign investments were lifted.
Regional markets in Hong Kong, Indonesia and Malaysia also rallied.
However the baht, the fastest-rising Asian currency in 2006, resumed its climb after Thailand exempted stock purchases from its new controls.
It traded at around 35.65 to a dollar on Wednesday after dropping to 35.96 a day earlier.
The currency had touched a nine-and-a-half year high of 35.06 to the dollar on Monday, which had prompted the Bank of Thailand to act.
In early afternoon trade on Wednesday the Stock Exchange of Thailand (SET) composite index stood at 686.15, up 64.01 points or 10.29%.
The Bank of Thailand had said late on Monday that 30% of non-trade related foreign exchange sold for the local baht currency must be deposited interest-free with the central bank for a year.
The measures also included a rule that required all new foreign investments over $20,000 to stay in the country for at least a year.
The move was to deter huge amounts of foreign capital flowing into the country to speculate on the stock market and baht currency.
It was hoped the move would dampen down the baht's rise, which has hurt Thai exports, by forcing speculators to keep their money in the country for at least 12 months or face a 10% penalty.
However, after the stock market slide, Finance Minister Pridiyathorn Devakula said on television that from Wednesday foreigners would be able to trade equities free of the restrictions on short-term fund inflows.
The restrictions still apply to overseas investments in bonds.
The day's upheaval on Tuesday reminded investors of the 1997 Asian financial crisis, when dramatic outflows of foreign funds - initially in Thailand - led to regional meltdown.
It came as the military-appointed interim government, appointed after a coup earlier this year, is trying to reassure investors that the country is a stable place to do business.
"It was really a big mistake on the part of authorities," said Hak bin Chua, economist at Citigroup in Singapore, of the decision to stem foreign capital inflows.
"It was a policy error. With the interim government, people are wondering what will happen."
And Marco Sucharitkul, president of JP Morgan Securities-Thailand, said: "Foreign investors will remain wary of Thai monetary and economic policies for the next few months."