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Published on September 13, 2007

Instead, relevant authorities should facilitate Thai retail investors, particularly those in up-country areas, with easy access to the stock market. Retail investors would help reduce the influence of foreign investors, he said.

The former central bank governor said at a seminar that foreign investment was worth 40 per cent of overall market capitalisation. Foreign investors' daily trading volume accounts for 80 per cent of the total, as they are active players in the market. Therefore, foreign investment has significantly manipulated the movement of the Thai bourse, he said.

The foreign influence is a result of globalisation, while the authorities have tried to attract foreign inflows into the Thai capital market in order to boost the stock market. Financial globalisation, however, has resulted in improving the Thai financial market and the bourse has become an important source of funds, said Pridiyathorn.

At the same time, the foreign inflows have had a strong impact on the economy and the stability of the foreign-exchange market. The foreign manipulation has minimised the effectiveness of policies intended to solve economic problems. Pridiyathorn said some measures had been ineffective in assisting the real sector.

"We have developed the market without careful direction, unlike Malaysia and China. Our policies have become arm-twisting tactics as we have allowed foreign investors to manipulate our market to the highest level in the region," he said.

Pridiyathorn added that he was not against mainstream economics, which should continue to be the main method of economic development, but said any development weakness should be corrected to allow it to boost national income without creating social and cultural impacts. "We have facilities for people in Bangkok and foreign investors, but have nothing for money-owners in the provinces. Don't be worried that the stock market would not be bullish if foreign investors did not come," he said.

Pakhawat Kovithvathanaphong, president of Trinity Watthana, said the stock market had encouraged foreign investment rather than domestic investors for the past 30 years, because the country earlier had to rely on foreign capital.

Although domestic savings are currently high, they are mostly in commercial banks rather than the stock market. Most funds, such as pension funds, have an investment policy emphasising the bond market instead of the stock market, he said.

"We cannot shut down the liberalisation policy, but the government should encourage domestic investment in the bourse," said Pakhawat.

Pridiyathorn said the country needed continuous measures to stabilise the capital flow and prevent its impact on some sectors. The money power of big players in the forex market could easily shake the baht, with its trading volume worth only Bt300 million to Bt400 million daily, he added.

Anoma Srisukkasem

 The Nation