Time to revive Thailand's stock market and equity financing to break the bank oligopoly?
By Jon Fernquest
Surprising Fact: Business finance in
Thailand depends
almost completely on bank loans.
Thailand's stock market and stock shares held by the general public no longer play as important a role as they once did.
During the 1990s the stock market declined in importance and has yet to really recover.
The Stock Exchange of Thailand (SET) index slid from nearly 1,700 points in 1993 to 1,200 in 1995, before the crisis, and reached a bottom of 214.53 in August 1998:
The boom years of the 1990s helped lure tens of thousands of retail investors into the market with the promise of quick riches. The subsequent collapse equally led tens of thousands to lose their fortunes and confidence in equities as an asset class. (Source: Bangkok Post, 20-10-08, link)
(See photo on right of the hustle bustle on the New York Stock Exchange in the age before computers)In Thailand bank credit now accounts for "as much as 90% of gross domestic product."
The market capitalisation of the Stock Exchange of Thailand (SET) lags at just 79% of GDP.
The development of efficient capital markets would "help bring down funding costs for companies by offering competition to the banking sector."
These points were made yesterday in a speech given at the Stock Exchange of Thailand (SET) by Finance Minister Korn Chatikavanij, a former chairman of JPMorgan Chase in Thailand and a long-time investment banker.
More points made by the Finance Minister:
* There are no plans to
intervene in interest
rates set
by local banks.
* The oligopolistic nature of the banking industry and the authority wielded by the largest banks was a constraint for the economy.
* Market dominance by local banks at times may lead to injustice or unfairness.
* One challenge is how we can make the equities market compete with banks as a source of business funding.
* Market confidence on the part of investors and securities issuers can only come through a clear and firm commitment to ethics and corporate governance.
* The appointment of qualified regulators to SET and the SEC without conflicts of interest.
* The oligopolistic nature of the banking industry and the authority wielded by the largest banks was a constraint for the economy.
* Market dominance by local banks at times may lead to injustice or unfairness.
* One challenge is how we can make the equities market compete with banks as a source of business funding.
* Market confidence on the part of investors and securities issuers can only come through a clear and firm commitment to ethics and corporate governance.
* The appointment of qualified regulators to SET and the SEC without conflicts of interest.
depends on - needs, cannot live without
the general public - all the people in the country (not a small elite rich group)
Stock Exchange of Thailand (SET) - Thailand's stock exchange located in Bangkok between Sukhumvit road and Klong Toey market (See Wikipedia and list of companies with stock traded on the exchange)
the SET index - includes all the stocks on the exchange, measures whether stock prices went up or down every day (See Wikipedia)
lure - make people go to a place or do something by using a trick
retail investors - small individual investors who purchase stocks for themselves (not large organizations investing for others)
the subsequent collapse - the collapse that happened afterwards
equities - stock shares in different companies
an asset - a valuable thing owned by someone (stocks, bonds, real estate, a home,a loan = the right to receive payment of a debt )
an asset class - a kind of asset (one of many different kinds: stocks, bonds, real estate,...)
hustle bustle - describes a noisy, busy place crowds of people moving around doing things
bank credit - loans from banks
GDP, Gross Domestic product - a measure of economic activity in a country, the value of the country's output of goods and services. GDP is defined roughly as: GDP = Household Consumption + Business Investment + Change in Inventories + (Government Spending - Taxes) + (Exports - Imports) (See Economist Glossary)
market capitalization - measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. (See Wikipedia)
lags - delays, having to wait before something happens
capital markets - the markets and exchanges where the stock shares and bonds of companies and governments are sold to raise money
efficient capital markets - capital markets with large numbers of buyers and sellers that make buying and selling easy, also no one trying to manipulate prices on the market for profit
intervene - get involved in the business of other people
intervene in interest rates set by local banks - when the government enters the market for bank credit and tells banks what interest rates to charge on loans (also use government owned banks to influence market interest rates offered by private banks)
oligopoly, oligopolistic nature - the control of an industry by a small group of companies (See Wikipedia)
wield - use (something that is powerful or dangerous; wield power, wield a knife)
authority - the power to make decisions that others have to follow
authority wielded by Y - the power to make decisions and orders that Y has
constraint - something that limits or controls what you can do (See glossary)
dominance - being more powerful than others
market dominance - being more powerful than others in a market (more customers, can set prices, ...)
injustice, unfairness - not fair, treating some people better than other people, unequal treatment
securities issuers - companies that issue stocks, bonds, debentures, etc....
commitment - promising to continue doing something over long periods of time
ethics - believes about what behaviour is right or wrong
a clear and firm commitment to ethics - clearly promising to do what is right (and never stopping)
corporate governance - the setting the high level goals and policy of a business
conflicts of interest - when your private interests conflict with your duties to the public
private interests - the benefits you hope to receive in the future (for example, from owning shares in a company)
