Thaksin gives quiet nod to market fund

April 3, 2001

PRIME Minister Thaksin Shinawatra has quietly expressed support for the creation of a stock market fund to boost stock prices, similar to that used by Hong Kong authorities to prop up its stock market during the financial crisis of 1997 and 1998.

But the big question is how to do it, and where the money would come from.

During a workshop on capital market development at the weekend, the delicate concept of the stock market fund was raised. Financial sources said there were a number of participants who supported the concept, including Association of Securities Companies chairman Viroj Nualkhair, and Thaksin himself.

Viroj has rallied to create a stock market fund, as a way of preventing national financial assets from a further meltdown. In fact, last year he suggested the fund could be as big as Bt40 billion, with the government pitching in Bt20 billion and the private sector the other Bt20 billion.

This time around, Viroj said that for the stock market fund to work, it had to step in to shore up stock prices without the financial markets knowing. To openly intervene would lead investors to buy the stocks in advance, to pocket the profits. Thaksin apparently liked Viroj's comments and agreed to explore the idea further.

"He supported the idea of the stock market fund, he but did not reveal a time frame [in which one could be established]," said Somjet Moosirilert, a workshop participant.

At the height of the Asian financial crisis, when the Hong Kong stock market crashed from 16,000 to 8,000, the Hong Kong authorities quietly bought up stocks. Then speculators attacked both the Hong Kong dollar and stocks, trying to get the proceeds from the stock selling, to settle their short Hong Kong dollar positions.

Only when the Hang Seng index rebounded to 10,000 to 12,000 did the authorities admit their intervention.

At the time, the Hong Kong authorities had no problem digging into their pockets to buy up stocks. But the Thai authorities do not now have the money to establish the fund.

Thailand's stock market fund, if it is created at all, may be a match fund, with the government contributing 50 per cent of the money needed to create it, with the other half provided by the private sector. Another formula could be 25 per cent government money, 75 per cent private funds.

"But getting the private sector involved will no longer make the matter secret," said another participant in the workshop. "I think the stock market support fund is a good idea," said a financial sector source.

"For we cannot allow stocks to fall further. Some stocks are trading below their fundamentals. The presence of the fund should help boost their prices. Eventually, the fund should make money, like in the case of the Hong Kong fund," said the source.

Creation of the stock market fund is part of the Thaksin government's policy to add more demand to the capital market.

The workshop focused most on discussing the supply side of the stock market.

The highlight of the workshop was the creation of a concrete plan by the government, with specific timing, to list state enterprises for privatisation. Moreover, tax incentives will also be offered to companies looking to list on the stock exchange - both the Stock Exchange of Thailand, and the Market for Alternative Investment.

The workshop also discussed private equity funds and venture capital funds as possible sources to support small- and medium-sized enterprises, because many of the businesses were deprived of capital.

The idea is that private equity funds and venture capital funds, with financial backing from the government, would help them mobilise capital to start up or expand their businesses, before seeking a further listing on the secondary market.

BY THANONG KHANTHONG and

SIRIPORN CHANJINDAMANEE