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.