Bangkok: Academics point out that "confidence" is the key to sustaining the Thai capital market.
According to Thai News Agency, the Thailand Development Research Institute (TDRI) recently held a forum to address the pressing issue of confidence in the capital market. Experts highlighted the necessity of reducing corruption and strengthening law enforcement to attract long-term savings back into the Thai capital market.
The seminar, titled "Decoding the Crisis of Confidence in the Thai Capital Market," revealed that the crisis is not just about economic returns but is a "structural crisis of confidence." If left unaddressed, this crisis could undermine the capital market's role as a significant source of national savings and investment. Additionally, the seminar showcased a study focusing on enhancing public savings through the capital market system.
Dr. Somchai Jitsuchon, Senior Researcher at TDRI, shared insights from a study on "Enhancing Savings Through Capital Market Channels," noting that while Thais do not lack savings, they tend to diversify their investments into various areas such as real estate, education, and alternative assets. The study found that the capital market does not offer a clear advantage over other savings channels in terms of return and risk, particularly concerning "the risk of fraud."
Dr. Somchai emphasized that for the public, risk perception is as crucial as potential returns. Consequently, many prefer to invest in avenues where they feel they can manage risks better, even if these do not yield higher returns than the capital market.
The study concluded that improving the appeal of savings through the capital market requires more than just investment promotions or tax incentives. Reducing systemic risks, especially fraud, is essential to creating a "trust advantage" for the capital market. Without addressing fraud risks, the capital market struggles to differentiate itself from other savings options.
Associate Professor Dr. Thani Chaiwat from Chulalongkorn University pointed out that the main issue in the Thai capital market is the "perceived risk of investors." This perception encompasses not only price volatility but also concerns over corruption and ineffective law enforcement.
While boosting capital market returns is challenging due to economic and structural dependencies, immediate steps can be taken to mitigate fraud and exploitation risks. Confidence in the capital market is multifaceted, with institutional and foreign investors valuing governance and regulation, while retail investors focus on protection and punishment of wrongdoers.
For short-term recovery, the focus should be on achieving "tangible results" such as swift legal actions and deterrent punishments. Long-term, structural reforms in governance and regulation are necessary to revitalize the market's confidence.
If fraud and exploitation risks are effectively curtailed, the Thai capital market can regain its competitive edge and play a pivotal role in mobilizing savings for the country's economic development.