Korn unhappy with investigation on stock market rumour

Finance Minister Korn Chatikavanij is unhappy with the way the Securities and Exchange Commission (SEC) has handled the rumours that rocked the stock market last week.

He said the incident also suggested institutional investors did not play a positive role in stabilising the market, contrary to the perception that overall, they had a more desirable influence than retail investors.

On October 1415, rumours about His Majesty the King's health spread across the market, causing the Stock Exchange of Thailand Index to plunge by 55 points - or 7.3 per cent - over the two days.

Korn yesterday expressed his frustration and told reporters the capitalmarket regulator, the SEC, had not made any progress in investigating who had instigated the rumours.

"Police may be asked to take action if the SEC cannot do its duty," he said.

Korn said he wanted to know how the regulator would in future manage rumours that cause market panic. Rumours are uncontrollable and could happen in any market, but the authorities must know how to react when they do occur, he said.

The SEC has asked for one month before it can draw a conclusion on whether some illintentioned investors had used rumours to make gains in the equity market. Its preliminary investigation has not however found any irregular trade patterns, said the minister.

Some people have pointed fingers at investors with close connections to former prime minister Thaksin Shinawatra as being behind last week's rumours.

Korn said institutional investors on October 1415 had sold more stock than retail investors during the time the rumours were spreading.

However, as institutions, they are sophisticated and have access to more information than retail investors and should not therefore have been panicked by the rumours, he said.

"It's now not the case that institutional investors are preferred to retail investors as far as our efforts to promote the market are concerned," said Korn.

"We should promote all kinds of investors, including retail investors, which can now access information almost in the same fashion that large investors can do."

The finance minister conceded that a volatile stock market coupled with large swings in the exchange rate could negatively affect economic recovery.

However, he said several current indicators, such as monthonmonth export growth, suggested economic recovery was building.

If the economy expands by 3 per cent next year, the government could run a smaller fiscal deficit than currently predicted, he said.

The government plans to run a deficit of Bt350 billion under the annual budget, while the total deficit is expected to be about Bt600 billion, including public spending worth about Bt350 billion under the second stimulus package.

The overall deficit will be about 6.5 per cent of gross domestic product, said Korn.

Rising public debt peaking at 60 per cent of GDP has been projected, but the government will be able to manage its fiscal position, he said.

Korn said the ministry would soon revise its spending on the healthcare scheme for state officials, in an attempt to curb runaway costs.

Meanwhile, the new socialwelfare scheme - the National Pension Fund - approved by the Cabinet on Tuesday will not add much to the budget next year, said Korn.

The government may need to provide Bt20 billion annually to support the scheme, which will provide a pension for workers in informal sectors, such as drivers of taxicabs and motorcycle taxis.

The scheme is expected to be implemented by the middle of next year, following parliamentary approval, the minister added.