In a televised address to the nation on August 2, Prime Minister Abhisit Vejjajiva said there were definite signs that the country's economy was moving towards recovery, citing the rise of Thailand's securities markets as one of the major indicators of a return to positive territory.
"The situation may not be as bad as many have thought earlier," said Abhisit.
Though not a ringing endorsement of the economy, at least one sector appears to agree with the prime minister, with Thailand's capital markets becoming increasingly active of late. In line with other regional bourses, the Stock Exchange of Thailand (SET) has been performing well, hitting highs not seen for more than 10 months in early August, having advanced around 42.5% since the beginning of the year.
Though some analysts have suggested the composite SET Index could retreat due to profit taking or further slowing of the economy, others believe the government's economic stimulus programme, which is heavily weighted towards infrastructure spending, could drive the market up further.
Alongside infrastructure expansion, the government is also looking at overhauling the country's capital markets, hoping to attract higher levels of local and foreign investment, and significantly increase the SET's capitalisation and encourage more firms to list on the exchange.
In late July, the finance minister, Korn Chatikavanij, announced that he hoped to have a major programme of capital market reforms ready for cabinet approval by September.
According to the minister, tax rules relating to capital markets will be streamlined, including regulations governing mergers and acquisitions, individual provident funds and venture capital.
In addition, the programme will put in place measures to liberalise the securities industry, overhaul laws to encourage mergers and acquisitions, and encourage the development of new financing instruments such as infrastructure funds, officials said.
One of the main objectives of the reforms was to increase the capitalisation on the SET from the present level of below 100% of GDP to 150% of GDP by 2013, Korn said.
The SET itself is also working to increase the number of listed companies, striking agreements with bodies such as the Board of Investment and the Thai Bankers Association, allowing the exchange to access their client databases to identify potential candidates for listing.
According to Vichate Tantiwanich, the SET's executive vice-president for issuer and investor marketing, with financial institutions now paying more attention to debt-to-equity ratios before approving loans, listing on the exchange is becoming an attractive option for raising capital.
"The capital market is an important funding source to help companies maintain their financing. It is a win-win instrument for all parties, including companies, banks and the SET," he said in an interview with the Bangkok Post on July 31.
The SET is also looking to be a winner through plans to demutualise into a public company within the next several years, moving from being a customer-owned member organisation to a shareholder-owned public company. SET officials have said the proposed move would see a doubling of market capitalization and an increase in public listings.
The plan to demutualise was given support by Jean-Pierre Verbiest, country director of the Asian Development Bank's Thailand Resident Mission, who told an investment conference in late July that Thailand should reform its capital markets and deepen the equity market through transforming the SET into a private entity and integrating the bourse with others in South-east Asia.
Another measure that will bolster investor confidence in listed companies is the requirement, due to come into force in 2011, that all firms trading on the SET 50 meet International Financial Reporting Standards (IFRSs), with all other companies required to do so by 2015.
The implementation of IFRSs, mandated by the Securities and Exchange Commission (SEC), which serves as Thailand's capital markets regulator, will increase transparency and provide a clearer picture of a company's accounts, according to Thawatchai Kiatkwankul, the SEC's director of the accounting supervision department.
"The adoption of international accounting standards by Thai companies will help the local capital markets compete for global investors and capital," he told local media on July 14.
As is the case across the Thai economy, success in endeavours to broaden the base of the country's capital markets and increase investments on the SET will depend to a degree on maintaining political stability. Though the SET is currently rebounding, a loss of local and international investor confidence could quickly see it go off the boil, and put market reforms on the backburner.