Measures a result of long deliberation

July 19, 2000

IT would seem that the measures unveiled by the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission (SEC) were put together hastily in response to growing political pressure to revive the slumping stock market. Yet this is not entirely the case.

The chain of events started last Monday at a weekly meeting of the Council of Economic Ministers during which the Cabinet members focused their discussion on the near-collapse of the stock market.

They asked why, despite the improvements in most economic indicators, the stock market continued to perform badly. There was a suggestion that the Board of Investment should encourage companies receiving its promotional privileges to list on the stock exchange. This would increase supply in the stock market and woo back foreign investors.

Yet a Cabinet member, who has an insight into the Board of Investment, said the problem with the stock market might possibly have to do with the poor management of the SET. It was intended as a passing remark. Yet local newspapers picked it up and played it as a political uproar over the laxity of the SET amid the continuing slide in Thai equities. Immediately, Vicharat Vichit-vadakan, the SET president, was on the mat.

The SET's board met soon after to approve a handful of measures designed to prop up the market. The board agreed on the original schedule for liberalising the commission fee on securities transactions. But the most notable measure was its decision to corporatise the SET. By doing so, the SET will be divided into two bodies; one which would be responsible for day-to-day operations, while the other would deal with capital market development. Still, while the stock market is the most visible barometer of the performance of the Thai economy and investors confidence in it, it is a very complex body.

Prasarn Trairatvorakul, the secretary-general of the Securities and Exchange Commission, appeared to rush to Vicharat's defence when he commented that it would amount to an over-generalisation if the management of the SET were to be blamed for the stock market's slump. For a host of variables come into play, he said, which affect movements of equity prices, including US interest rate movements, the ailing financial sector, the level of non-performing loans, political uncertainty, the debate over the high public debt, and so on.

Almost simultaneously last week, the SEC's board, chaired by Finance Minister Tarrin Nimmanahaeminda, also met to work out 11 measures aimed at turning around the stock market. Prasarn argued that the measures were not a knee-jerk reaction to political pressure, nor were they designed to appease the politicians.

For if investors looked at the measures closely, he added, they would find that they were not put together in a piece-meal way. "Absent are such measures as the establishment of a support fund to prop up the market or give-away tax cuts to the corporates," Prasarn said. "You can see that these measures really address the fundamentals of the Thai capital market, which would have been implemented any way if we were to move forward."

These measures have been under discussion over the past three to four months with different government bodies. So the decision to push them now may have more to do with the fact that the package was ready, rather than any political pressure. The test, however, will come now when the measures are put into practice.

BY THANONG KHANTHONG