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
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