Finance One Plc is a purely capital market animal, reports Thanong Khanthong

Finance One Plc, the technically bankrupt company, was an alter ego of the Stock Exchange of Thailand, as its stock prices moved in almost perfect harmony with the SET index during the nine years of its roller-coaster ride as a listed firm on the exchange.

The accompanying chart shows how Fin-One, suspended from public trading of its stock last Monday after revelations that it had been in talks to merge with the Thai Danu Bank, saw its wheel of fortune rise and fall in parallel with the Thai stock market.

Fin-One's total assets also inflated with the Thai bubble economy, rising from Bt2.5 billion in 1986 to Bt17.7 billion in 1990; Bt28.2 billion in 1991; Bt42.3 billion in 1992; Bt52.3 billion in 1993; Bt72.6 billion in 1994; Bt97.1 billion in 1995; and more than Bt100 billion in 1996.

Fin-One's net worth also climbed sharply from Bt137 million in 1986; Bt2.44 billion in 1990; Bt4.08 billion in 1991; Bt4.52 billion in 1992; Bt5.99 billion in 1993; Bt7.99 billion in 1994; Bt14.97 billion in 1995; and Bt15.10 billion in 1996.

Making its debut on the stock market in July 1988, Fin-One, led by takeover king Pin Chakkaphak, saw its stock prices tango rhythmically to the tune set by the SET index. Its stock price soared from Bt11.50 to Bt32.00 in 1989 when foreign capital began to flow into the emerging markets, including the Thai market.

Over the following three years, US interest rates were to remain weak, precipitating an outflow of US investment to the international capital markets. The SET index would leap from the 400s to surpass 1100 before the end of 1991, turning the Thai market into a favourite of international portfolio managers.

Fin-One set its sights on dormant securities companies, snapping up controlling and sizeable stakes through leveraged buy-outs in Securities One in 1986, First Asia Securities in 1987, Jardine Fleming Thanakom in 1988, Prime Finance & Securities and Asia Equity in 1990, Thana One in 1992 and Ekkapat in 1993.

Fin-One regarded itself as being at the cutting edge of the Thai capital market. A pioneer in the debt and equity-linked market in both issuing and placement, it was the first Thai financial institution to issue Euro-convertible debentures ­ a big risk at that time. Moreover, it had 33.79 per cent and 14.78 per cent respectively of the market share of primary and secondary domestic bond sales.

In 1990, the Fin-One stock oscillated from a low of Bt23.75 to a high of Bt45.75, before the Gulf War crisis stifled the market's momentum. The SET index, which peaked at 1104 and fell to 561 in November 1990, upset the regular market cycles.

Fin-One would rebuild momentum in anticipation of the arrival of new liquidity, rising again from a low of Bt15.25 to a high of Bt76.50 in 1991; a low of Bt37.75 to a high of Bt64.00 in 1992; and a low of Bt47.75 to a high of Bt183.00 in 1993.

Between 1991 and 1993, the Thai stock market was to fall below the 700 level once before starting its upward momentum. The great bull run started in June 1993 when the SET index jumped from the starting gate at 808 points.

Buoyed by the stampede of the global liquidity drive, the SET index would double its value before the end of the year. On Jan 4, 1994, it peaked at 1789. This record has never been broken due to the drying up of liquidity, though the period opened windows of opportunity for Thai corporations to issue Euroconvertible bonds on international markets.

Then the stock market returned to its cyclical pattern. Fin-One's stock would move in a range between Bt102 to Bt214 in 1994. In June, Fin-One embarked on a massive capital increase and its stock peaked at Bt214. This triggered a wave of recapitalisation, which put downward pressure on the stock market.

In 1995, Fin-One weakened to Bt106 to Bt178. It was this year that Fin-One was shopping around for banks, sharpening its focus on the Bank of Asia. Pin would not realise his takeover dream without a commercial bank under his arm, through which the capital-hungry Fin-One could rely on lower funding costs.

Pin's foray into the BOA would fail, as Chulakorn Singhakowin, the president of the medium-sized bank, put up a strong defence.

In February 1996 Fin-One announced that it would buy 20 per cent of Thai Danu Bank on friendly terms. Fin-One was suspended from trading for five days. When it resumed trading, it started at Bt177 but was never able to reclaim its past glory.

Fin-One nose-dived from Bt177 to Bt60 by the end of last year, losing 66 per cent of its value on the back of the economic downturn and the turmoil in the capital market. With liquidity virtually evaporating, the SET index also tumbled from 1422 in February 1996 to 664 this year ­ a five-year low.

The attack on the baht, the severe tight liquidity, the high interest rates and the bearish sentiments, combined to deal a blow to Fin-One and other finance companies. The over-leveraged, high-finance Fin-One was the first to throw in the towel by announcing that it would merge with Thai Danu Bank.

On Feb 28 it closed at Bt23.75, and has been suspended from public trading ever since. On that same day the SET index ended at 727.56, having kept Fin-One as its hostage for most of its boom-bust cycle.

Fin-One's boom period was between 1988 and 1995 when, fattened by asset inflation, its market capitalisation shot up from Bt840 million in 1988 to Bt6.33 billion in 1989; Bt5.24 billion in 1990; Bt13.56 billion in 1991; Bt14.28 billion in 1992; Bt57.76 billion in 1993; Bt47.05 billion in 1994; and Bt60.84 billion in 1995.

When the Thai economy went bust in 1996, Fin-One's market capitalisation also plunged to Bt26.33 billion ­ about half its 1993 level.