The Bank of Thailand should cut interest rates to increase liquidity in the financial market so local investors can invest in cheap stocks, says a Finance Ministry official.
The stock market could not rely on foreign investors, who have been net sellers for the past month although they had a net-buy position when the Stock Exchange of Thailand rallied on Friday. The financial meltdown in the United States is forcing foreigners to sell shares worldwide, including Thailand.
The official, who asked not to be named, said the market fall did not mean performance of listed companies was poor. Actually, they have performed well when compared with last year.
"Though Thai shares have fallen across the board, many companies still have strong fundamentals. If investors buy them now, just gaining dividends is worthwhile," the official said, adding that even China's central bank announced an interest rate cut on Friday.
The official said the Bank of Thailand's main reason for raising interest rates this year - the one-day repurchase rate is now 3.75% - has been to tame inflation.
But he said central bank analysts should take into account the fact that inflation is now easing in line with the sharp drop in world oil prices since July.
In any case, it would be hard for the Thai government or a company to issue bonds now as the cost would be high.