Local stocks up as investor concerns ease

Local stocks up as investor concerns ease.

KRISSANA PARNSOONTHORN

FOREIGN BUSINESS ACT / FOREIGN INVESTOR REACTION

Local stocks gained 0.9% yesterday after the government moved to ease investor concerns over changes to the Foreign Business Act. The SET index closed at 622.27 points, up 5.52, in trade worth 16.66 billion baht. Bank stocks rose 2.54% on the day, while energy stocks gained 1.05% and property gained 1.44%.

The SET index had dropped to as low as 608.14 points in morning trade before rebounding in the afternoon on eased concerns about the Foreign Business Act.

But foreign investors continued to dump shares, with a net sell position of 1.4 billion baht, while retail investors were net buyers of 1.28 billion and local institutions net buyers of 122.71 million in stock.

Analysts said investors dumped stocks of several blue-chip firms that were expected to be affected by the FBA reforms.

The SET on Tuesday said 15 listed companies would be affected by the reforms as their foreign shareholdings, both direct and indirect, now exceeded 49%.

While SET president Patareeya Benjapolchai declined to identify the companies, analysts said telecoms, property, mining and transport stocks were among the sectors that were hardest hit.

According to Trinity Securities, listed firms with foreign shareholdings clearly over 49% included Advanced Info Service, Aapico Hitech, Bumrungrad, Charoong Thai Wire & Cable, Golden Land, iTV, LPN Development, LV Technology, Padaeng Industry, Precious Shipping, Raimon Land, Shin Corp, Singer and Ucom.

''Investors are still uncertain about what firms are affected. No one knows which ones will be singled out,'' an analyst said.

The government said it would conduct random inspections of listed firms to see whether they were in compliance with the FBA and the 49% rule, in terms of voting rights and nominee structures.

Analysts said the Commerce Ministry should clarify the classifications of FBA sectors to help ease market uncertainties.

Companies will be given one year to restructure their capital if foreign shareholdings are 50% or higher of total capital. Companies that are in FBA-controlled sectors and are in violation in terms of voting rights will have two years to adjust.

But many issues remain uncertain.

''If foreigners hold more than 49%, and the stock is split among different foreign investor groups, how will they manage the dilution? And if there is no agreement among the shareholders, what would the government do to force compliance?'' one analyst asked.

AYS Securities, in a research note, said that if Shin Corp was found to be a foreign company, with different holding companies deemed proxies for foreign investors and Temasek Holdings, then other firms would face similar problems. Many foreign investors were likely to rethink expansion or mergers-and-acquisitions plans in light of the uncertainties, the broker said.

The FBA reforms were prompted by an investigation into Temasek's takeover of Shin Corp last year. The Singaporean company has insisted that Shin remains a Thai company as the majority of shares are held by Cedar Holdings, a vehicle in turn majority controlled by Siam Commercial Bank and Kularb Kaew.

Kularb Kaew is two-thirds owned by Surin Uptakoon, a Thai-Malaysian businessman, with the remainder controlled by Temasek.

Bangkok Post
Thursday January 11, 2007