Although we are pleased with the
some proposals put forward at Saturday’s capital market development
forum, we believe these measures don’t go far enough to either
promote investment in the stock market or encourage companies
to list in the market. While most of the measures are aimed at
increasing supply, there was nothing to attract new demand. Given
the build-up to this forum, the market will likely be a little
disappointed as well.
We are actually disappointed that
the meeting concluded with lower tax rates for only new listings,
but couldn’t conclude a similar benefit for those companies already
listed. Many companies won’t seek a listing because the depressed
state of the market means they would have to offer their shares
at a low price. Tax cuts for already-listed companies would increase
corporate earnings, boost investor sentiment and thereby encourage
more companies to list.
After
the meeting, Thaksin said that 70% of the necessary measures were
finalized at Saturday’s workshop leaving just a few to be considered
by the relevant agencies. We assume this means that current listed
companies would also be given tax incentives, but further discussions
would have to be made with the revenue department before a final
decision is made. We are also disappointed that the reduction
in tax rate applies for only five years before reverting back
to the old 30% rate.
We were expecting more, especially
as there are a number of compelling reasons for a permanent reduction
in the corporate income tax rate. Listed companies have long complained
that the tax burden unfairly falls on them, as their unlisted
rivals do not pay an equivalent amount of taxes. We don’t believe
the government would lose a significant portion of its revenue,
as many companies already have Board of Investment (BOI) tax holidays.
Others have sizeable tax credit carry forwards after suffering
from massive losses over the last several years.
Prior to the forum, several proposals
were mentioned to boost demand for Thai script, including personal
income tax credits, a private savings scheme where the government
provides matching funds and a market support fund. However, none
of these proposals were included in the announced measures.
We are very pleased that the Public
Company Act will finally be amended to allow par value below Bt10.
Since the outbreak of the crisis, many companies have had no choice
but to be in violation of the law. With the amendment allowing
par value as low as one satang, creditors and debtors will have
much more flexibility in settling debt-restructuring cases. Also,
this will help some of the listed companies with high share prices.
Companies, like Delta Electronics, Advanced Info Service, Shin
Corps, Siam Cement, BEC World and PTTEP, could reduce their par
value to Bt1 to bring their share prices down to the Bt10-50 range.
Market development measures
produced at capital market development forum
We are pleased that a lot of emphasis
has been placed on the listing of the state enterprises, but at
the same time not completely convinced. It has been the policy
of every government over the last 10 years to list the state enterprises,
but most have failed. The government wants to list Internet Thailand
and the Petroleum Authority of Thailand and offer 300mn shares
of Thai Airways International (THAI) to the public in the third
of fourth quarters this year. Although the government is targeting
these share sales this year, we suspect that the market has to
improve first. For example, THAI is currently trading just Bt1
above its all-time low of Bt27.
