Sunday, September 2, 2007

Thailand's new stock market chief says it is a great place to list

Building a better bourse

New SET chief says a high-level committee will be set up to convince companies to list

CHIRATAS NIVATPUMIN


The SET is maturing and speculative stocks "only account for 5% of the total" on the market and just 1.5% of its capitalisation, says Mr Pakorn.

The 13th chairman of the Stock Exchange of Thailand offers a grin as he settles back in his chair.

''It's been a busy week, no doubt. There's been a lot to do,'' says Pakorn Malakul Na Ayudhya, his trademark Elvis hair weave intact, albeit tinged with just a bit of grey to mark his 65 years.

The career technocrat is no stranger to the capital market. More than three decades ago, Mr Pakorn, then a young central banker, helped lay the foundations for the stock exchange. In 1992, he moved from the Bank of Thailand to help set up the Securities and Exchange Commission, and was its secretary-general from 1995-99.

''My focus for now is to look at the supply side. We need to attract new companies to join the exchange,'' Mr Pakorn said.

On Friday, the SET announced that it would set up a new high-level listing committee comprised of representatives of key agencies such as the Federation of Thai Industries, the Thai Chamber of Commerce, the Export-Import Bank and the Thai Bankers Association to help identify _ and persuade _ top companies to list on the exchange.

''We're bringing in the heavyweights that relate to the capital market to help,'' Mr Pakorn said. ''This committee's role is to help directly recruit companies to list on the SET.''

New listings have been few and far between this year, with only three on the SET and two on the Market for Alternative Investment in the first half.

But Mr Pakorn said recently extended tax incentives would be a powerful incentive for companies to join the market, particularly as economic sentiment looks to improve going into 2008.

Companies filing to join the exchange by the end of the year can qualify for a special 25% corporate tax rate for the next three years and a 20% rate for MAI listings, a significant cut from the normal 30% rate. Companies must apply for listing by December and complete their listing in 2008 to qualify.

Improving the supply side of the market also involves development of new securities products, Mr Pakorn said, pointing to the launch this week of exchange-traded funds and the planned introduction this year of SET50 index options.

SET officials will also hasten work to create linkages with overseas securities markets and facilitate cross-border listings and investment.

''I'm convinced that if the market has the right products, at the right price, investors will come,'' Mr Pakorn said.

He praised initiatives by MAI president Chanitr Charnchainarong to enlist the help of newly listed firms as case studies to promote the benefits of a market listing.

''We need to explain to [non-listed companies] what the benefits of joining the market are by promoting the success stories,'' Mr Pakorn said.

''Listing and compliance costs are often cited as obstacles. But I am convinced that the costs are ultimately less than the benefits of going public, whether in terms of capital or goodwill.''

At the same time, long-standing initiatives to improve investor protection and corporate governance will continue to be priorities.

Mr Pakorn said studies showed that companies practising good corporate governance were clearly rewarded by investors. ''It's a clear trend worldwide. If a company doesn't comply with principles of good governance, it will be ignored.''

Public perceptions of the local capital market as a haven for speculators and share manipulation were overblown, Mr Pakorn said.

''It's a myth. Stocks that might qualify as speculative only account for 5% of the total. In terms of market capitalisation, these stocks represent just 1.5% of the exchange,'' he said.

The long-term benefits of stock investment were equally obvious, he said. ''If you go back to the beginning of the SET, an investment in 1975 would give a 2,900% return to date. Putting the same amount of money in the bank would return 795%.''

Perhaps the greatest challenge going forward is to ensure the future relevance of the Thai market within the global investment community. ''We need to think what will be the position of the SET in five or 10 years. What will we be? What should our strategy be?''

Mr Pakorn noted that while the size of the SET, at 66% of gross domestic product, had grown to match that of the banking sector and bond markets as a capital source for the economy, other countries had gone well ahead.

''We've grown at a relatively satisfactory pace. But consider that Malaysia's stock market is 152% of GDP, and Singapore's is 281%. They have moved much further ahead,'' he said.

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