The top 10 financial issues of the year

The Finance Desk starts its New Year's series today with the hottest issues in the financial market over the past year and will run articles relevant to the macro economy, the baht, the banking and insurance sectors, and the capital market until the end of the year.

Over the past 12 months, the Thai financial market has experienced twists and turns that not only made headlines but will also shape the future financial landscape.
The Nation has ranked the top 10 hot issues in the financial market in 2006 as well as their future consequences that we consider significant for the market.

1. No issue this year was comparable with Shin Corp's share sale to Singapore's Temasek Holdings. The repercussions from that deal were huge and spread over a panoramic scene of politics, business, social issues and patriotism.

On January 21, Temasek Holdings bought a 49.6-per-cent share of Shin Corp from five members of the Shinawatra and Damapong families for Bt73.3 billion at Bt49.25 per share. Criticism was overwhelming, particularly on the point that that the deal was tax-free.

Meanwhile, activists campaigned against the intrusive Singaporean investment in Thailand. The deal consequently shook the Thaksin Shinawatra government, triggering intensified political turmoil that ended in the September 19 coup.

Due to the adverse impact, Temasek now owns a 96-per-cent stake in Shin Corp and will reportedly record an unrealised loss of more than Bt25 billion if it is forced to sell Shin shares in order to meet the foreign shareholding limit of 49 per cent.
The repercussions have still not ended. The probe into state officials regarding the tax issue continues while the issue of the use of nominees is still not settled.

2. Yesterday, the Bank of Thailand (BOT) launched its strongest anti-speculation measure since the 1997 financial crisis by ordering financial institutions to withhold 30 per cent of all foreign investors' capital inflows.

The measure, considered as "capital control" by foreign investors, caused

the SET index to crash yesterday and forced the Stock Exchange of Thailand to implement a first-step circuit-breaker

by ordering a stock trading halt for

30 minutes at 11.30am. Many market players complained that the measure

was too harsh, while exporters expressed satisfaction when the baht depreciated significantly after the measure came into play.

Finance Minister MR Pridiyathorn Devakula said the new measure may bring about a significant short-term impact. However, the authorities may have to consider the initial impact. BOT officials said the central bank might revise the measure if the baht stops appreciating rapidly as it has been doing over the past few weeks.

The central bank has launched a series of actions to curb baht speculation but it still continues. This was the reason for the new 30-per-cent rule.

The baht has appreciated more than 16 per cent this year to mark a nine-year high, due mainly to capital inflows and short-term speculation. The baht closed yesterday at Bt35.90-35.93 to the US dollar.
The stronger baht has adversely affected exporters who have not covered their currency risk as their price competitiveness declined. The baht grew stronger at a faster pace compared to Thailand's trading rivals this year, but over the past two years baht appreciation has not been higher than others.

3. The bloodless coup on September 19 brought about changes in top posts. One resulted in the first female governor of the Bank of Thailand, Tarisa Watanagase.

On October 17, the Cabinet appointed her as the central bank's 21st chief to replace MR Pridiyathorn Devekula, who became deputy prime minister and finance minister of the interim government.

Tarisa, 57, is a civil servant who has climbed to the top job at the central bank, which oversees the country's monetary discipline and economic stability. She has been working as an economist for the central bank since 1975 and has held the post of deputy governor since 1992.
On the same day, Siam Commercial Bank's board of directors appointed Kannikar Chalitaporn to replace Jada Wattanasiritham, whose term as bank president and chief executive will expire in January.

4. On March 23, the Supreme Administrative Court ruled against Egat's privatisation.

The Supreme Administrative Court revoked the two royal decrees supporting Egat's privatisation. One decree highlighted the privatised entity's power and rights, the other the deadline when Egat's state-enterprise status would come to an end. The court ruled that the earlier transformation of the state agency into a public company was illegitimate.
The ruling has pushed Egat's privatisation back to square one and it has consequently raised the question of whether the listing of other state enterprises, including PTT and MCOT, is legal. The interim government has also made it clear that there will be no privatisation over the next year.

5. On August 28, Bank of Ayudhya (BAY) announced an agreement to sell a 25.4-per-cent stake to General Electric's financial arm, following approval from the Finance Ministry and the Bank of Thailand after rumours about the deal had been leaked.

The bank originally scheduled a shareholder meeting on September 20 to approve the deal. The coup threw the situation into doubt for a while, but GE later confirmed that it would commit to the deal.

On October 31, GE Capital International Holdings Corp (GECIH) confirmed that it will buy a 25.4-per-cent stake in BAY, with the first share purchase of 1.39 million shares to be made by January 10. The shares will be sold at Bt16 apiece, meaning GECIH will invest a total of Bt22.24 billion in BAY.

6. After facing strong protests from social and religious activists, Thai Beverage's plan for an initial public offering and listing on the Thai stock market was aborted. Hence, the local distillery owner and brewer of Thailand's best-selling Chang Beer had to seek a listing on the Singapore Exchange - the biggest fund-raising effort in Singapore for a decade.

The first trading debut of Thai Beverage's 4.89 billion shares in Singapore with a market capitalisation of at least Bt200 billion came on May 30.

The Sirivadhanabhakdi family was expected to obtain up to Bt20 billion from the sale of its shares in Thai Beverage through a public float.

The deal caused Kittiratt Na Ranong to decide to resign from the presidency of the Stock Exchange of Thailand as he was strongly in favour of Thai Beverage's listing on the SET rather than on Singapore's stock market.

7. On June 1, Patareeya Benjapolchai, 54, veteran of the Stock Exchange of Thailand, was appointed as the SET's new president to replace Kittiratt Na-Ranong, who resigned after five years of service to the equity bourse.

Despite serving the SET for 30 years, Patareeya admitted that becoming the 10th president of the SET, with the full support of SET chairman Vijit Supinit, was beyond her wildest dreams. Patareeya is the SET's second female chief after Sirilak Ratanakorn, who filled the post from 1982 to 1985.

Shortly after Patareeya took charge, Sopawadee Lertmanuschai was transferred from the post of executive vice president of the SET to president of the Thailand Securities Depository.
Three months after Sopawadee's transfer, executive vice president Suthichai Chitvanich was moved from the Market Regulation Division to the Corporate Governance and Investment Relations Division. The reason given was that the pair's supervision was too strict. The transfer of the two high-level veterans brought about criticism of the SET's good governance.

8. Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula announced on November 10 during the Economic Forum that he would set off a Big Bang to overhaul the Securities and Exchange Commission and free it from political inference once and for all.

Under the reform plan, the secretary-general and all board members, including the chairman, will be nominated by a search committee, rather than appointed by the finance minister with approval by the Cabinet. The SEC's board will be empowered to sack the secretary-general with a two-thirds vote.
The SEC will draft a bill to amend the Securities and Exchange Act to reflect this new direction and send it to the Cabinet early next year. Then the bill will be submitted to the National Legislative Assembly for passage during the term of the interim government.

9. Siam City Bank's search for a new president became a hot potato between the bank's board of directors and the Bank of Thailand.

Arun Chira-chavala resigned recently to accept responsibility for the bank's disappointing earnings. The bank then established a selection committee to find a new president.

There were two dominant candidates, Lersuk Chuladesa, SCIB's first senior executive vice president, and Chulakorn Singhakowin, former president of the Bank of Asia, which has been merged into United Overseas Bank (Thai).

It became apparent that bank chairman Sompol Kiatphaibool wanted to appoint the insider Lersuk, despite the panel giving him a lower score than Chulakorn.

The Financial Institutions Development Fund (FIDF), the bank's largest shareholder, insisted that the bank's board appoint the candidate rated highest by a selection committee. But there is also pressure from employees and the board for an insider to take the post.
The bank's board of directors will decide the issue on December 26.

10. On April 28, Thailand Futures Exchange (TFEX) started trading for the first day offering only one product, SET 50 Index futures.

It is Thailand's first financial derivatives market following the establishment of the commodity futures market - Agricultural Futures Exchange of Thailand (AFET) - two years before.
With 20 brokers licensed for trading in TFEX, the five most active brokers on the debut date were KGI Securities (Thailand), Trinity Polaris Futures, Asia Credit Securities, Kim Eng Securities (Thailand) and UBS Securities (Thailand).

Jiwamol Kanoksilp
The Nation