The government has not decided whether it should set up a fund to prop up share prices if the index plunges due to the euro-zone crisis as local brokerages are quite capable of doing so, said Kittiratt Na-Ranong, the deputy prime minister and finance minister.
The issue was raised during discussions on how the country should prepare for the crisis, which could spread to Spain and Italy from Greece.
From 2002-3, when stock markets crashed globally, a 10-billion-baht fund was set up for the purpose, he said.
"We're just saying that we are ready to set up such a fund," he said.
"It's a mechanism that we used. Back then, the fund was set up without the help of local securities firms, but it helped the stock market normalise quickly."
Mr Kittiratt said the strong balance sheets and performances of local brokerages reflect their readiness to contribute to the fund.
Securities companies welcome the idea of the fund but question the probability of such a scenario.
Terdsak Taweethiratham, senior executive vice-president at Asia Plus Securities, said a support fund for the euro crisis is good news for the market.
However, from Nov 24, 2011 to May 2012, foreign fund flows into the Thai share market topped 99.6 billion baht, but foreign investors have already sold 20 billion baht worth of shares.
Generally, foreign investors will sell around 40% of their holdings.
"If things do not worsen much, they will likely sell about 20% more."
"When foreign funds have flown out by a further 20 billion baht and if the SET Index can stay above 1,000 points, then the special fund is not essential," said Mr Terdsak.
Sukit Udomsirikul, assistant managing director of SCB Securities, said the fund is a positive for market sentiment. At very least, investors know that the fund is ready to buy the shares if things get out of hand, he said.
As for the impact on trade, the government is still keeping the export forecast unchanged.
Tourism, on the other hand, will hinge on political stability, he said.
Mr Kittiratt also said the Finance Ministry will not increase the excise tax on oil in the near future in order to avoid affecting domestic retail prices.
As long as the Energy Ministry needs to increase the levy on oil to replenish the state Oil Fund, the ministry would avoid increasing the tax, he said.
The government will also extend from the end of this month the period for diesel tax reduction to half a satang per litre from 5.31 baht per litre because the fiscal collection still exceeds targets.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said the central bank has tools to manage liquidity in case of panic in the stock market, which could cause significant capital outflows.
"Our foreign exchange control regulations are on the loose side. But if there is a risk from capital flight, we could tighten them," he said.
The central bank could lower the limits that companies and individuals are allowed to invest abroad.
As well, it could shorten the period exporters can hold their foreign currency earnings, he said.
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Writer: Parista Yuthamanop & Nuntawun Polkuamdee