PRIVATISING Thailand's best state enterprises is the quickest way to boost investor confidence and put the stock market back on the path to recovery, according to the president of SBC Warburg Premier Securities Co Ltd.

Thienchai Charnchanayothin emphasised that privatisation will add quality products to the stock market at a time when most corporations are under earnings pressure and have lost the confidence of investors, who are instead focusing their attention on only a handful of stocks out of more than 400.

''About 80 per cent of the trading volume on the stock market is concentrated in 20 or so listed companies," he added.

Thienchai echoed a recent comment by Pakorn Malakul Na Ayudhya, the secretary general of the Securities and Exchange Commission, who backed privatisation as a cure for the stock market. A market recovery would improve general economic conditions, making it easier for the authorities to tackle liquidity, financial and foreign exchange crises.

''The challenge to corporations today is whether they can maintain positive cash flow. If they can do that, then they'll be okay," Thienchai said. ''A country is similar to a company. It must have a positive cash flow.

''If the government leads the privatisation drive, it will bring in fresh foreign capital, which will immediately create stability in the overall economic system."

He said privatisation of the top-performing state enterprises will add to the strength of the stock market through the increase in market capitalisation, which currently stands at Bt1.5 trillion.

Thai corporations and financial institutions have been experiencing a meltdown of their assets, linked to the crash of the stock market. The equity market structure is heavily skewed toward the banking and finance sector, which accounts for about 45.3 per cent of market capitalisation.

This is followed by 17.3 per cent for utilities and transportation, 16.5 per cent for manufacturing, 11 per cent for mining and agriculture, 4.5 per cent for construction, 4 per cent for wholesale and retail and 1.6 per cent for others.

Many analysts agree that privatisation through initial public offerings and foreign fund mobilisation of state enterprises will help reverse the outflow of capital at a time when foreign investors are concerned about the stability of the baht.

The inflow of fresh capital from the privatisation of state enterprises will pave the way for improvements in liquidity and reduce the upward pressure on interest rates. Eventually, the banking regulators may have more room to adjust their foreign exchange policy so that the baht can be more flexibly managed.

A team of the prime minister's advisers at Baan Phitsanulok is working out a privatisation programme as part of fiscal consolidation. Yet investment bankers have sharply criticised Chavalit Yongchaiyudh's privatisation programme for being cosmetic.

''Take the privatisation plan for the Telephone Organisation of Thailand for example. They will set up a holding company, which will make an initial public offering. Yet the holding company has nothing to do with the management or improvement of the efficiency of the state agency," an investment banker said.

''This kind of privatisation only makes the underwriters richer, without really helping the management to improve. Privatisation must involve strategic partners to help create value at state enterprises."

Tarrin Nimmanahaeminda, a former finance minister and a Bangkok Democrat MP, said in Parliament yesterday that the privatisation programme is being undertaken in a fashion that makes it look like the government is only interested in money.

''The state enterprises are assets which have been held for some time. If we privatise them now, it means that we have to sell them cheap. Is that appropriate?"