Amaret points to structural weakness

August 29, 2000

ABOUT 1.23 million Singaporeans, or almost one-third of the city-state's population, own stocks. Last year they opened about 50,000 Internet securities accounts.

But only 400,000 of the 65 million Thais own stocks. And, as of last year, they did not yet have any exposure to online trading.

Stock Exchange of Thailand chairman Amaret Sila-on cited these figures to illustrate the structural weakness of the capital market, which has suffered from three years of crisis.

If the cases of Taiwan and South Korea are considered, Thailand looks almost backward, he said. Taiwan has about 17 million stockholders, 550,000 of which have Net accounts. More than nine million Koreans own stock, and last year they opened 1.8 million Net securities accounts.

Individually, Thais are not that poor, he said. The problem is that most of their savings are locked up in bank deposit accounts, he said, adding Thailand boasts 700,000 accounts worth at least Bt10 million. Thais prefer to bank their money because of the government guarantee, he said.

Amaret pointed to a joint study by the Bank of Thailand and the Office of the National Statistics, which found 71 to 88 per cent of Thai savings go into bank accounts, while only 0.25 to 1.7 per cent is put into equity.

Without money in the capital market, firms do not have a big enough long-term capital base on which to rely, he said. Heavy reliance on short-term financing from the money market has proved disastrous to the economy, he said.

"Our structural problem in the capital market can be traced back decades. It is not the fault of the present government alone. We all need to be aware of it and try to solve it," said Amaret.

The underdeveloped nature of the capital market is highlighted by the ratio of market capitalisation to domestic credit. Thailand's ratio is only 30.66 per cent, compared with 105 per cent for Malaysia, 272 per cent for Hong Kong, 266 per cent for Singapore and 148 per cent for the US.

Japan and Germany are the two developed countries whose capital markets remain far behind other countries in terms of development, he said. Japan's market capitalisation to domestic credit ration amounts to 63 per cent, followed by 48 per cent for Germany.

"At present, foreigners own about 20 per cent of the Thai stock market, with the remainder made up of investment by Thais, who mostly borrow the money for this investment purpose," he said.

"We don't have a long-term financing base for our economy, so how can we have a strong economy? All Thais must address this problem," he said.

BY THANONG KHANTHONG