Constraints on Thailand's Equity Market as an Allocator of Foreign Investment Capital: Some Implications for Post-Crisis Southeast Asia

This paper assesses whether Thailands stock market can act as a vehicle for the allocation of foreign investment capital to the Thai corporate sector, within the context of this countrys post-crisis recovery process. With both foreign and domestic bank lending to Thailand likely to be constrained in the immediate years ahead, some emphasis is being placed on equity capital and the stock market as a vehicle for foreign portfolio equity investment as a means to inject the funding necessary to help finance the countrys corporate sector recovery. But is this emphasis well placed? The paper examines the objective, subjective and external constraints that face any reliance on the Thai stock market as a conduit for foreign capital investment in the post-crisis period, and proposes some policy prescriptions arising. While this study pertains directly to Thailand, many of the factors discussed and conclusions drawn are also applicable to three other countries in Southeast Asia (Indonesia, Malaysia, and the Philippines) with relatively substantial stock markets.