FOREIGN BUSINESS ACT
SET steadies after telecom exemption
After a sharp plunge on Tuesday, the Thai stock market headed up yesterday, thanks to the authorities' announcement that telecom companies were partially exempt from the amended Foreign Business Act.
The Stock Exchange of Thailand (SET) Index yesterday closed 0.9 per cent higher at 622.27, off the day's lowest level at 608.14, following a clearer picture of the draft act - which has less effect on foreigners than earlier estimated.
As investors cooled off with the announcement yesterday by Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula that telecom companies would not be subject to the 50-per-cent voting limit, they stopped selling shares in telecom companies.
Yesterday, Advanced Info Service ended flat at Bt75, off the day's low at Bt70.50, while United Communication Industry was down 1.6 per cent at Bt31, off a low of Bt28.75.
Pridiyathorn told foreign investors yesterday that among 1,337 companies to be affected by the amendments, only six were listed.
SET president Patareeya Benjapholchai, however, repeatedly said that about 15 companies identified as being in Annex 1 and 2 of the law might have to adjust their shareholdings to meet with the draft.
"The adjustment of the definition of 'foreigner' in applying the Foreign Business Act of 1999 will not affect most listed firms," she said, referring to a preliminary study of public companies. "This is because most listed firms are in the act's Annex 3, which will not be affected. About 15 businesses classified as being in Lists 1 and 2 of the act might have to adjust their shareholdings to meet the revised definition."
The speeches of the two officials were made available to alleviate investors' concerns over the draft Foreign Business Act, which was approved in principle by the Cabinet on Monday.
Under the draft, foreign investors under Annex 1 and 2 will be subject to a maximum shareholding and voting rights of 49.99 per cent, while those under Annex 3 will be required to hold shares not exceeding 49.99 per cent but will not have to reduce their voting rights.
In a note, Trinity Securities said 14 listed companies might be affected by the amended Foreign Business Act.
For instance, foreign holding in Aapico Hitech is full at the company's 49-per-cent foreign-ownership limit, while foreigners have voting rights of 56 per cent of vote-bearing shares.
Bumrungrad Hospital has foreign shareholding of 48.7 per cent, while the company's foreign voting accounts for 52 per cent.
Shin Corp's foreign shareholders own 44.4 per cent, and their voting represents 45 per cent of vote-bearing shares. This is based on the assumption that Kularb Kaew, the largest shareholder in Cedar Holdings, is defined as Thai.
Kularb Kaew's case is under court consideration.
A Trinity Securities' analyst commented that the draft would cause foreign investors to slow down their direct and indirect investment in Thailand, even though its effects did not seem as harsh as they did before.
Ayudhya Securities said companies with foreign shareholding exceeding 50 per cent did not come under any annex in the draft law, because they were manufacturing and electronic firms or had their own specific laws, such as brokerages and banks.
As for the hotel sector, the broker said none of the listed hotels had foreign shareholding greater than the limit.
Raimon Land director and senior vice president Kitti Tangsriwong said Thais now owned up to 51 per cent of the firm.
"Our management team is also professional, and they are not representatives of foreign investors. As a result, we don't know why the SET indicated that our firm may be subject to this Foreign Business Law," he said.
He said the company's legal adviser would send a letter to the SET asking about the issue.
However, Kitti said he accepted that once the Cabinet approved the Foreign Business Act, the company's foreign customers wanting to buy condominiums would wait and see, because they would like to digest the impact.
The company's legal adviser must explain the draft to its customers, he said.
Also, SVI and Compass East Industry (Thailand) executives rushed to clarify that their companies were not hurt by the draft, because they had received Board of Investment privileges.
Meanwhile, James McCormack, head of Asian sovereign ratings at Fitch Ratings, said yesterday the amendments might hurt inward investment slightly, but not enough to prompt a reassessment of the country's sovereign credit ratings.
"I think it sends a signal to investors, rightly or wrongly, that Thailand is not as open to foreign investors as it was," he said, "though it's not going to make a material difference to the country's external finances."
Fitch rates Thailand at BBB+ with a stable outlook.