Govt unveils plan to boost SET
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Govt unveils plan to boost SET

Incentives to counter market challenges

(Photo: 123RF)
(Photo: 123RF)

The Finance Ministry and stock market regulators on Monday announced measures to revitalise the sluggish Stock Exchange of Thailand (SET) index, yet they played down a request from stock analysts to revive the tax-incentive long-term equity funds (LTFs).

Pornanong Budsaratragoon, secretary-general of the Securities and Exchange Commission (SEC), said that stock market regulators will propose to the cabinet to revise investment conditions of Thai ESG (TESG) funds to support the stock market.

Under the proposal, the tax deduction cap would be raised from 100,000 baht to 300,000 baht, and the holding period would be shortened from eight years to five years, she told a joint press conference attended by Finance Minister Pichai Chunhavajira.

"We have discussed this with experts from the stock market, and they said changing the holding period to only five years and raising the tax deduction cap to up to 300,000 baht will make the TESG more attractive enough for their investments," said Ms Pornanong.

Pornanong: SEC wants more savings

"The SEC wants to see more savings, which eventually leads to financial wellbeing, which is the main goal of the capital markets," she noted.

Mr Pichai said the proposal would be proposed to the cabinet within two weeks. "We will try our best to make the new measures effective as soon as possible, but we might be unable to make it in time for the cabinet next week," he said.

Stock exchanges in Japan, South Korea, China, and Singapore have embarked on reform and are now focusing on promoting long-term investment. The secretary-general pointed out that the Thai stock market already has a mechanism to support this investment.

The announcement came as the SET was trading at a four-year low, with the index plunging below the 1,300-point range last week as political uncertainties, particularly a legal case against Prime Minister Srettha Thavisin, have battered investors' confidence.

Investors have net sold more than 100 billion baht worth of Thai shares year to date, compared to 192 billion worth of net sales in 2023, according to Pi Securities. Although the SET index has rebounded, rising 0.79% to finish at 1,316 points on Monday, foreign investors remained net sellers of around 1.09 billion baht.

Ms Pornanong said additional regulatory amendments would become effective from July 1 onward, including short selling and programme trading to reinforce market supervision and boost investor confidence.

The revised regulations include the qualifications of securities eligible for short selling, the pricing mechanism for short selling transactions, the registration of high-frequency trading (HFT) investors, and information disclosure regarding investors involved in inappropriate trading practices.

Stock market analysts, however, gave a lukewarm welcome to the measures announced on Monday, expressing their disappointment that the LTFs have not been revived.

Pakorn: Some stocks have rebounded

Rakpong Chaisuparakul, senior vice president at KGI Securities (Thailand), said there should be some degree of buying back into the laggard plays in the SETESG index after the government increases tax incentives for the Thai ESG funds.

"However, we view that this ESG fund strategy is slightly disappointing for the public compared to market expectations for a return of the Thai LTF funds," he said.

Pichai Lertsupongkit, chief commercial officer at InnovestX Securities, said the announced measures should have a positive psychological impact on boosting the stock market, but the end results might not be as high as the government expects.

"Everybody had expected the LTFs would be revived," he said, adding that TESG funds are less attractive when compared to the LTFs given investment and holding conditions.

LTFs, which expired in 2019, could attract inflows to the SET in a range of 50-60 billion baht a year, while TESG, which was introduced in late 2023, should draw inflows of roughly 30 billion baht annually, noted Mr Pichai.

"So far, foreign investors have continued to net sell Thai shares, primarily due to a lack of confidence in regards to short selling," he said. "Measures that could be more effective in revitalising the SET include a ban on short selling, which is similar to what the South Korean financial authorities have imposed, but short-term adverse impacts would be unavoidable."

He added that more importantly, measures to boost Thailand's competitiveness should be clearly stated, as this could restore investors' confidence in the Thai economy's prospects.

SET President Pakorn Peetathawatchai said earnings per share have begun to improve, though the SET index remains a laggard. IT, healthcare and tourism-related stocks have rebounded, but heavyweight stocks in the energy and banking sectors haven't yet.

"Price-to-earning ratio is lower than the five-year average. Now, the timing is right for investors to consider coming back to the SET," he said.

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