Interview: Rapee Sucharitakul
What are the regulatory challenges for increasing market width and depth to promote the Thai capital market as a regional financial connector?
RAPEE SUCHARITAKUL: The SEC aims to ensure that a variety of products are available in the Thai capital market to better serve fund mobilisation while providing alternatives for investors worldwide, be they different types of mutual funds, real estate investment trusts (REITs) and investment funds, cross-border listings, dual listings or new derivatives. We are working to develop mutual funds in the coming years, as a key mechanism for infrastructure development in Thailand. Currently available are equity funds, bond funds, mixed funds, property funds, REITs and infrastructure funds. Other instruments in the pipeline include hedge funds, high-yield bond funds and high-leverage funds.
An important challenge is how the Bank of Thailand deals with capital transfers and capital outflows. One solution is to incentivise Thai people to invest overseas and put money into foreign portfolio investments. It used to be the case that specific exemptions and approvals had to be obtained for each transaction, but starting in 2016, blanket approvals to individuals have been introduced to allow net portfolio investment abroad. In terms of rulemaking, we drive our regulatory regime to high standards with a focus on practicality and the robust development of the Thai capital markets ecosystem. Effective communication and good understanding with all stakeholders are also priorities, to ensure that disclosure rules are clear and stakeholders achieve their goals.
What steps are needed to develop derivatives?
SUCHARITAKUL: In order for the derivatives market to work, there must be liquidity in the cash market, as these products by definition derive from the cash market. Looking at the derivatives available on the Thailand Futures Exchange, those with good liquidity include the Stock Exchange of Thailand 50 stock futures; the rest do not possess the underlying liquidity necessary, with small amounts of daily trade. The main issue around the introduction of commodities is whether the underlying market is large enough or has sufficient liquidity and uniformity for derivatives to ride on their success. In terms of complexity, the derivatives market is easier than the cash market for investors to understand. As such, investor education is not the primary issue hampering derivatives; rather, it is about having enough liquidity and volatility, as this is what the derivatives market builds its success upon.
How much progress has Thailand made in implementing corporate governance requirements?
SUCHARITAKUL: Corporate governance is an area we have focused on for more than 20 years, driving forward the importance of independent directors, audit committees and audit disclosures, and generally training people to understand and place importance on corporate governance matters. The question now is whether it has taken too much of a form base than a substance base. The ASEAN Corporate Governance Scorecard shows that Thai corporates have performed quite well in procedural areas and disclosures, but for board performance and board involvement we must still take stock of how far we have come to ensure that progress continues. Thai regulation, for example, often puts an emphasis on independent directors. However, with 60-70% of Thai companies still family-owned, independent directors often represent only a small fraction of the board, thus their involvement in decision-making cannot be fully gauged. At the SEC we are engaging in greater education and communication with the private sector through platforms such as our CEO forums, to have exchanges on these issues. In terms of ratings, rankings and evaluations, the key is to move away from form-based to substance-based data, and to assess how to make regulations achieve their outcomes.
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