Interview: Rapee Sucharitakul
How can capital flows to Thailand be stabilised?
RAPEE SUCHARITAKUL: Thailand has always been very mindful of hot money and capital flight, which in the past flooded the Thai market and caused some volatility. The fact that our capital market is relatively small in comparison to the rest of the world means that every time money flows inwards, there lies the possibility of a bubble effect. Global events create a rush to and from markets, which can create volatility, so our foremost mandate as the sector regulator is to ensure financial stability. Key to that aim is the disclosure-based regime, which will allow investors to consider the fundamentals of stocks, rather than just their valuations.
In a positive step, authorities are looking to find new products to be made available in Thai markets, which would ensure a sustainable level of capital activity. A good example of this is with infrastructure funds, as the government seeks to fund projects ranging from rail and airport developments to utilities infrastructure. For the public sector to invest in this alone would be a huge fiscal burden, especially during a time of economic recovery, so capital markets can effectively serve as funding venues in this regard. Thailand can also look beyond its borders, given that neighbouring nations like Laos, Myanmar and Cambodia also have massive investment needs and government funding may not be sufficient, so we hope to attract fundraising efforts for such projects to the Thai exchange in the near future.
How can retail investor protections improve while also expanding the sector’s product offering?
RAPEE: The primary focus in terms of protecting retail investors is to strengthen systems regulating the sale of mutual funds through bank branches. At the moment, the cumulative value of mutual funds under management is BT4.28trn ($120.6bn), which is about 30% of Thailand’s GDP, and 94% of that market share is held by banks that sell products through their branches and subsidiaries. Thus, it is very important for banks to invest the necessary money into providing backbone systems that support their sales staff, and ensure that both staff and customers are aware and cognisant of the product being bought or sold. To that end, several initiatives are in place, including mandating self-assessment questionnaires covering everything from financial institutions’ organisational structures to product governance, sales support systems, and controlling off-site sales, remuneration structures and more.
What revisions to the Securities and Exchange Act would serve to strengthen capital markets?
RAPEE: Draft amendments to the act proposed to the Ministry of Finance in 2016 would revise the law in several areas and strengthen the sector’s fundamentals. Reforms include potentially giving the SEC supervisory power over the exchange in line with international standards, as well as further promoting the governance of the Stock Exchange of Thailand (SET). This includes restructuring the SET Board of Governors to increase engagement and representation with a broader range of market participants in Thailand.
Another potential reform would be channelling Thailand’s BT8bn ($225.4m) worth of capital market development funds, which are currently set up under the SET, into an educational fund to engage in investor and consumer education, and to improve the quality of the sales force available in the industry.
Policymakers would also like to introduce trust law in Thailand, which is a concept that currently does not exist. This is important, especially when you consider the fact that Thailand has many family businesses where the founders are ageing, and the second and third generations are quite young, so there is a risk that business would be lost during this generational transfer. Trust funds would ensure the longevity of these businesses and reduce capital flight out of the country. Of course, these revisions are all subject to healthy policy debate, but room for reform certainly exists in this area.
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