Merchant Partners Securities' executive director and chief economist Thammanoon Ananthothai said that instead of spending billions of baht to subsidise and help farmers, this money should be used to set up a futures fund, along similar lines to the Vayupak Fund.

"It could be a fund like Vayupak, the Government Pension Fund or the Social Security Office Fund (SSO), the country's two largest financial institutions. If they could participate in trading on the Afet bourse, it would help increase sustainable active trading," Thammanoon said.

"It would be like when MFC Asset Management was first initiated more than three decades ago. Once the market became confident [in the concept], the industry was flooded by the number of asset-management firms. Afet is indeed in need of institutional investors."

CP Intertrade president Sumeth Laomoraphorn suggested that existing asset management firms consider adding Afet products to their investment portfolios.

Currently, mutual funds are allowed to invest on the Thailand Futures Exchange (TFEX), and Sumeth said some mutual fund companies had possibly been set up especially for futures trading.

Chanon Phucharoenyos, director and chief executive of JSP Futures, Thailand's biggest Afet broker in terms of trading volume, said the idea of setting up a futures fund had been widely discussed.

"Such a futures fund must also work with the Thailand Futures Exchange, because the products of Afet on their own may not be enough. In practical terms, a lot of work needs to be done to make it happen," Chanon said, adding that if there's no action from the government sector, the private sector can also act.

"There are two types of players in the market: those who have a little money and want to get rich quick, and others who are rich and want to diversify their risk management. In order to increase the trading volume, brokerage firms themselves need to approach wealthy people and suggest that they invest in Afet products."

All the Afet experts accepted that one obstacle was the number of regulators involved. The capital market is under the Finance Ministry, the Afet is under the Commerce Ministry and the SSO, the Labour Ministry.

The Afet has been operating for three years, but its trading liquidity is a major problem because retail investors do not understand the investment concept. The current trading volume is more than 200 contracts per day. The volume peaked at 1,084 contracts per day in August last year, when the price of rubber rose to more than Bt100 per kilogram.

Meanwhile, Afet's president Napaporn Kurupasuthachai said that next month the bourse would talk to the Thai Rubber Association about adding delivery points to rubber trading.

"Currently, we deliver rubber only on the boat. We're planning to increase convenience by adding a delivery point on the ground," he said.

Separately, Lang Hong Goldsmith's managing director Somphong Vajirakaphan predicted yesterday that the gold price would probably decline by around 5 per cent because of the selling force of European central banks. However, it is expected to rise again in the third quarter and may increase to 10 per cent above the current price. 

Piyarat Setthasiriphaiboon

The Nation