Thailand's capital market structure needs to increase the number of long-term investors to offset stock market volatility, with long-term equity fund (LTF) investment incentives remaining vital to attract long-term investors, says an industry veteran.
Paiboon: Beefing up the number of long-term investors necessary to strength Thailand's capital market structure.
"Current market fluctuations are partly because the Stock Exchange of Thailand [SET] index has many short-term investors who are trading based on index movements rather than fundamentals, as well as why there are investors that trade through automated trading programmes," said Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco).
Beefing up the number of long-term investors is necessary to strengthen Thailand's capital market structure. Fetco has already discussed the need to maintain long-term investment capital in the stock market with the Finance Ministry, said Mr Paiboon.
"If [long-term] investment capital is affected by annulling LTF tax privileges or bundling this [tax privilege] with the [tax perks for] retirement mutual funds [RMFs], this would cause long-term investment capital to recede in the stock market," he said.
"Having a lock-up period for 10 years will enhance the effectiveness of long-term investment in the stock market."
Earlier, Mr Paiboon said he disagreed with the Finance Ministry's plan to set the maximum for combined tax-deductible contributions for the new tax-saving fund and RMFs at 500,000 baht per taxpayer per year.
The RMF is designed to be a retirement savings fund because it requires individual taxpayers to lock up their contributions until they retire, starting from age 55.
Despite the low interest rate environment and ample financial liquidity, confidence has not recovered as domestic political problems have derailed optimism, while the baht appreciation has taken a toll on exports, said Mr Paiboon.
"An economic crisis is not likely over the next six to 12 months. We are waiting for fiscal and monetary policies to generate financial circulation, with public investment shoring up private investment flows," he said.
"If these measures work, the economy is not expected to be underwhelming for long and next year's GDP growth projection could be maintained."
Investor confidence for the three months to February, meanwhile, remains in neutral territory amid concerns over the earnings of SET-listed firms and lacklustre economic conditions.
The investor confidence index (ICI) stands at 87.93, up 1.7% from November's 86.44, according to a monthly survey by Fetco.
An index below 80 points is considered bearish, 80-120 is neutral and over 120 is bullish.
Broken down by investor group, the local institutional ICI stands at 117.65, proprietary traders at 116.67 and foreign investors at 100.
The retail investor ICI is at 59.50, the only reading in bearish territory.
Investors are pinning their hopes on a positive outcome from the US-China trade talks as the main factor to usher in confidence over the coming periods, said Mr Paiboon.