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Published on September 5, 2007

The director of the central bank's Financial Markets Operations Group, Suchart Sakkankosone, yesterday said the BOT wanted an in-depth interpretation of how ETFs were classified, even though they were defined by the Securities and Exchange Commission (SEC) as mutual funds.

"We must have a deeper understanding of whether [ETFs are] a stock," he said.

Earlier, the central bank denied a request from the SEC to waive its withholding reserve requirement for ETF investment. The commission had claimed ETF trading was similar to stock trading, which is exempted from the withholding requirement. The SEC has since asked the BOT to review its decision, as Thailand's first ETF begins trading tomorrow.

SEC secretary-general Thirachai Phuvanatnaranubala said the central bank's denial followed concerns over the volatility of the baht if foreign investors were allowed to invest in the fund without capital controls.

Moreover, the BOT was concerned that a waiver for the ETF would lead to other mutual funds making similar requests. However, Stock Exchange of Thailand chairman Pakorn Malakul Na Ayudhya said ETF trading was conducted in the same way as stock trading.

He believes foreign investment in the ETF in the short term will be minimal, and that capital inflows will not cause a big baht movement.

The open-ended Thai DEX Stock Exchange of Thailand 50 Exchange-Traded Fund will trade on the Thai bourse for the first time tomorrow.

Anoma Srisukkasem

 The Nation