Brokers skeptical about Thai market rescue drive
Brokers skeptical about Thai market rescue drive
By Vithoon Amorn
BANGKOK (Reuter): The Thai government and private sector have stepped up a joint campaign this week to rescue a battered Thai stock market but analysts were skeptical it could revive confidence and convince investors to return.
Government and private banks have joined brokerage firms to launch two market support funds that would provide a total of up to 25.7 billion baht ($1.03 billion) for buying stocks and lending to investors facing the prospect of being forced to sell shares to pay off debts.
Deputy Prime Minister Amnuay Viravan on Tuesday announced a broad tax and industry support package designed to help weak Thai exports that had widened the current account deficit and reduced Thai economic growth to its slowest pace in a decade.
Thai exports rose only 3.8 percent year-on-year between January and July, against 26.2 percent a year ago.
Private economists project annual Thai gross domestic product growth will slow to growth of as low as 6.2 percent in 1996 against 1995's 8.6 percent.
"The rescue efforts would give only a short psychological boost but market jitters would return as long as underlying economic and political problems are not addressed," said Nanthawat Chouysong of Poonpipat Finance and Securities.
Buoyed by buying of bluechips by part of a 15.27 billion baht rescue fund set up in August -- originally sized at 20 billion baht before being whittled down -- the stock index rallied on Thursday to close up 3.02 percent or 30.05 points.
It finished at 1026.21, well above the key psychological level of 1,000.
Another analyst at Seamico Securities Plc said stock buying by the rescue funds would provide an opportunity for foreign fund managers, who were recent major sellers of Thai stocks, to further unload Thai stocks in their portfolios.
Analysts said sentiment had also been eroded by political uncertainty ahead of a no-confidence debate against embattled Prime Minister Banharn Silpa-archa in parliament next week.
They said regardless of the outcome of the no-confidence vote, Thailand would likely see a change in its premiership later this month.
Banharn faces opposition allegations that accuse him of economic mismanagement, a land deal scandal involving his family, and plagiarism on the thesis of his master's law degree. He has denied the charges.
The Thai stock market declined 20.8 percent between July 2 and September 10 before it rebounded 4.5 percent on Wednesday and Thursday mainly on the reported launch of the two funds.
The Bank of Thailand has in the past week also helped by assuring the market that no finance and brokerage firms faced financial troubles although their earnings this year may have been hurt by prolonged weakness in the market.
The central bank said it was prepared to maintain stock and money market stability by injecting funds to sustain baht liquidity.
Analysts expect the market to greet Banharn's departure with a rally but they said how long the euphoria would last would depend on who parliament would pick as his successor.
They said although the launch of a 10-billion-baht rescue fund by state-owned Government Savings Bank had triggered a debate on the legitimacy of diverting public funds to help private stock investors, it probably came at a right time when an unpopular government leadership was heading for a change.