Last year practically speaking, there was no initial-public-offering issue, as the Thai economy slid into its deepest recession in modern history. Of the Bt126.68 billion that was raised in the primary market in the first nine months of 1998, Bt121.71 billion was raised through private placements and the remaining Bt4.96 billion through public offerings, according to statistics provided by the Securities and Exchange Commission.

''This year, I think, private placement will continue to dominate the market, but the market will watch to see who will be the hero by making a public offering,'' said Dr Prasarn Trairatvorakul, Securities and Exchange Commission deputy secretary-general.

Siam Commercial Bank is also testing the market by planning a public offering of Bt20 billion, a sum that matches its plan to seek Bt20 billion in tier-1 capital from the Aug 14 Financial Restructuring Programme. Its public offering is expected to be initially offered to the Crown Property Bureau, Sanwa Bank and other existing shareholders.

Thai Farmers Bank recently successfully raised capital by Bt40 billion with its highly innovative capital securities, Stapled Limited Interest Preferred Structures, which are considered a private placement, for minimum individual investment in securities of Bt10 million.

The Thai Farmers Bank issue, which carries a seven-year maturity, is locked into costs of about 11 per cent, although it is paying depositors 6 per cent. The bank will have to handle the trade-off as it puts its house in order.

''Not all banks can raise money the same way as Thai Farmers,'' said Prasarn, adding: ''If others try to issue bonds, they will need to anticipate the interest-rate trend in order to lock in their costs. If they incorrectly anticipate the direction of interest rates, they will have problems.''

Companies are cautious about making public offerings during this period of sluggish sentiment, because public-offering failure would not only be a PR catastrophe but also undermine confidence in the raising of capital in the future. With interest rates coming down and much liquidity in the market, investor perception is gradually changing.

With short-term rates of 2.5 per cent and deposit rates between 6 and 7 per cent, investors are more willing to take risks. Conversion of its deposits into capital securities accounted for about half of the Bt40 billion raised by Thai Farmers Bank. Thai policy-makers are broadly pursuing a loose monetary policy to drive down interest rates, so that hopefully part of the Bt6.5 trillion deposited in the banking system will be converted into equity.

''Thailand does not lack liquidity at the moment. We simply do not have enough equity,'' said Staporn Jinachitra, a Siam Commercial Bank senior executive. ''Thai people, particularly those who have a lot of money saved in banks, should be encouraged to invest in Thai companies or banks. They should buy hotels, apartments or other assets, which are very cheap now, to help stimulate the economy.''

Siam City Bank also has much liquidity. Its top management recently asked the Bank of Thailand to let it buy between Bt20 and Bt40 billion worth of government bonds that it could consider as tier-1 capital. By so doing it could convert its liquidity into equity, a move that would make it unnecessary for the authorities to sell Thai banks cheaply to foreign investors as planned.

The management of the bank now thinks that it would be a costly mistake to sell the bank to foreign banks, because they would buy in cheaply. They believe that the performance of Thai banks will quickly improve after recapitalisation, which will be easier with the excess liquidity in the financial system. Siam Cement Plc, the blue-chip construction conglomerate, is considering the possibility of refinancing its short-term debt of Bt56 billion with a Bt30-billion bond issue. However, the company declined to elaborate, saying only that it plans a local bond issue, which should be finalised in March.