Thailand - Thai stocks rise to 16-year high

The Thai bourse continues to defy a storm of negative factors, showing no let-up in the inflow of foreign funds that have now pushed the main index to a near 16-year high.

The Stock Exchange of Thailand (SET) Index yesterday hit its highest level for 15 years and eight months, or since July 11, 1996, at 1,207.67 points, thanks to turnover of 39 billion baht (US$1.27 billion).

According to the SET website, overseas investors' purchases were 1.76 billion baht ($57.2 million) higher than their sales. This month to date, foreign net buys have reached 24 billion baht ($781 million), while year-to-date net buys have hit 73.6 billion baht ($2.39 billion).

SET president Charamporn Jotikasthira attributed the bull-run largely to a combination of strong corporate earnings growth, at 16 per cent on average since 2009, and 17-per-cent average dividend growth.

The bourse has also recently gained further attraction as it was included in FTSE Group's Advanced Emerging Markets this month, aside from benefiting from easing concerns over the US recovery and euro-zone debt, he said.

Meanwhile, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has signalled the continuation of tax incentives for investors in shares and bonds, saying that the incentives are crucial to boosting national savings.

He also wants the Securities and Exchange Commission to review the brokerage liberalisation policy, which began this year, saying that the impact of the policy had not been properly thought through and full implementation could therefore be delayed.

Kittiratt said yesterday that he did not agree with his immediate predecessor as finance minister, who wanted to end tax deductions for those investing in retirement mutual funds (RMFs) and long-term equity funds (LTFs).

While in office, Thirachai Phuvanartnaranubala planned a reform of the incentives, which are seen by some as favouring the rich.

After meeting with top executives of the SET, Kittiratt said the incentives were for everyone that invests in the capital market.

An investment of up to 500,000 baht ($16,250) in an LTF is tax-deductible, on condition that the investment is held for at least five calendar years. This incentive is due to end in 2016.

For investments in RMFs, no end is set for the tax benefit. Savers can deduct individual taxable income of up to 500,000 baht for investment in a RMF combined with savings in provident funds and pension funds.

"Should these incentives end, the government would [have to] offer other tools to promote national savings," he said.

At the end of February, outstanding investments through the two types of funds stood at 246.8 billion baht ($8.02 billion), up by 48 billion baht or 24.3 per cent from the same period last year. Of the total, 149.7 billion baht ($4.87 billion) was invested in LTFs.

Charamporn said that during the meeting with Kittiratt, the stock exchange had proposed more tax incentives for firms listed on the second-tier bourse, the Market for Alternative Investment, to encourage more listings from provincial small and medium-sized enterprises.

He said that as the government was cutting corporate tax to 23 per cent this year, then to 20 per cent next year, MAI-listed firms should also enjoy a lower rate than they currently pay.

MAI-listed businesses are at present subject to tax at 20 per cent of their annual profits.

Charamporn said the exchange had also asked the Finance Ministry to allow trading in agricultural futures, besides which it is seeking a change in the law related to foreign listings.

He said he shared Kittiratt's concern over brokerage liberalisation, as having too many securities houses could damage the market and lead to poor service for investors due to excessive competition.

Kittiratt, meanwhile, expressed disappointment with the overall quality of research by brokerage firms. "There is much room to improve research quality," he said.

He added that high-quality financial research and a high financial-|literacy rate would attract people to invest in the capital market. The Bank of Thailand is in charge of the financial-literacy project.

The finance minister also said that as Asean would become a single market by 2015, the local stock exchange had to learn and adopt best practice from other regional bourses, notably those in Singapore, Malaysia and Indonesia.

Taxes and laws that are obstacles to increased market development will be eliminated, he said.

Wichit Chaitrong

The Nation

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