Reforms vital to revive stock trade
Firms too reliant on banks, money market

Market capitalisation of the SET is around $38 billion, with around 400,000 shareholders in the country. Around 200,000 accounts are open at local brokers, although just 50,000 are active.

In contrast, South Korea's equities markets has a capitalisation of $260 billion, with nine million shareholders and 7.5 million brokerage accounts.

The Malaysian market is worth $145 billion, with 2.7 million shareholders.

The market in Singapore has a capitalisation of $163 billion and some 1.2 million shareholders.

"Twenty years ago, the other markets in the region weren't better than us. Why have these countries been able to develop their equities markets?" Mr Amaret asked rhetorically.

"We can build up our industries. Look at automobiles. So why can't we build up the financial markets? "Mr Amaret said tax incentives were needed to give good companies an incentive to enter the exchange, which in turn would help attract investors.

Many listed companies, forced to comply with stricter disclosure and accounting rules, have complained that they are at a competitive disadvantage to their non-listed counterparts.

Mr Amaret said the government should look to even up the playing field and focus the attention of tax officials on non-listed firms.

"Why don't we use resources to audit the companies that don't pay taxes fairly. We should encourage companies that pay taxes correctly. Instead, we reward the bad and punish the good. This way, who wants to be good? "Attracting investors by boosting confidence in the exchange and educating the public about the benefits of stock investment were also needed for restoring balance in the markets.

"A government survey several years ago showed just 0.25-1.27% of national savings comes to the stock exchange, with around 71-88% in the banking sector," Mr Amaret said.

"So for every 100 baht in savings, just one baht goes to stocks. There are more than 700,000 fixed accounts nationwide with balances of more than 10 million baht each." Instead, the SET has long been dominated by short-term speculators, selling and buying shares in the hopes for sentiment-led gains.

"It's strange. How old is the market?.. 25 years. The fundamental problems have been here for a long time," Mr Amaret said.

"Do we truly have any investors in Thailand? People who really purchase stocks because they have confidence in a company, and are looking six months, one year, two years in the future?" The Stock Exchange of Thailand recently announced it would launch a programme together with local schools and universities to educate students about basic investment principles.

Officials have also stepped up promotions and seminars to help educate investors about companies or products in the market.

"One of the problems of the stock exchange is that of the 400 or so listed companies, trade is focused on only about 30%," Mr Amaret said.

"So we need to build public understanding about the exchange. We need to build confidence that once people invest, they won't be taken advantage of by major shareholders.

"We need government help to restore the balance, whether its through tax incentives or other means," Mr Amaret said.

Earlier this year, the SET announced a range of new measures to help spur capital market development, including speeding up state enterprise privatisation, the introduction of non-voting depository receipts and exchange-traded funds and support for Internet trading.

Regulatory changes to encourage the setting up of retirement funds would give institutional investors a greater role in the market, reducing volatility and helping move the exchange more toward long-term investment.

Corporatisation of the SET itself, where the exchange is transformed into a private, profit-making company, would help boost the market's efficiency, crucial for adapting to the rapid changes sweeping global markets.

But changes would not come overnight, Mr Amaret said. Yet action was required.

"If turnover remains like this, then the market is in trouble. Investors will go to Singapore, to Hong Kong. Our best companies will list overseas. We need to take action," Mr Amaret said.