Several negative domestic factors have brought about sluggish sentiment in both the equity and bond markets, and the number of companies awaiting approval from the Securities and Exchange Commission (SEC) for listing on the bourse has fallen to just 13, compared to about 30 early last year.

The main Stock Exchange of Thailand index yesterday broke a key psychological resistance level to reach 701.85, but was unable to maintain the rise. The SET Index corrected to close at 693.86, down 0.57 per cent on the day.

Brokers said the market was hit by profit-taking after breaching 700 points.

SEC secretary-general Thirachai Phuvanatnaranubala said late on Wednesday that aside from fewer companies pending for listing, long-term debenture issuance over the past two years had been falling. In 2005, there was Bt210 billion in new issuance, falling to Bt160 billion last year.

He said the fall in companies filing for listing was due mainly to negative factors over the past four months, particularly the Bank of Thailand's 30-per-cent capital withholding measure announced on December 18.

Then, on January 9, the Cabinet approved a controversial draft amendment of the Foreign Business Act.

Thirachai suggested investors closely monitor the impact on their investments from the political situation as well as other events.

He added that these negative factors were mostly short term. Once the central bank revokes its capital reserve requirement, investor confidence will be restored.

In the long-term perspective, the SEC chief said the securities watchdog still needed to improve several regulations that are obstacles to market development.

There must be more products and stocks in the market to increase income for brokers. Moreover, the funding costs of brokerage firms must be competitive compared to foreign markets. Therefore, issues of commission fees and securities business liberalisation should be addressed.

So far, the central bank has allowed local investors to invest abroad via mutual funds, provident funds and investment portfolios of securities firms and asset-management companies.

However, in Taiwan, the authorities allow individuals to invest overseas with a limitation of US$5 million (Bt178 million) per person. The investment amount can be controlled via customers' accounts opened at securities companies.

This method, Thirachai suggested, could be used in Thailand.

"I think allowing Thai individuals to invest overseas would reduce pressure for baht appreciation, reducing the need for the Bank of Thailand to buy dollars which will unnecessarily increase international reserves," he said.

He added that the SEC had proposed that the central bank limit the amount individuals can invest abroad, which can be raised later if it does not cause any problem. However, the bank disagreed with the proposal, as it remains concerned about the volatility of capital flows.

Siriporn Chanjindamanee

The Nation