The Securities and Exchange Commission has stepped up its plan to allow cross-country trading of unit trusts among Asean members in the near future. The decision – tied in with Asean’s action plan to link capital markets in the region – was taken after a quarterly meeting between the SEC and the Association of Investment Management Companies (AIMC).

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Asean unit-trust move

It is widely criticized that Thai listed companies have weak corporate governance comparing to those in developed countries. It can also be explained that this weak corporate governance was one of the causes that led Thailand into the current crisis. This is because there was not enough transparency and reliable information for investors and even the management to accurately assess the relevant risks and make prudent decisions. In addition, this poor governance also caused the unconfident investors to withdraw or cancel their investment which made the crisis become even worse and take a long time to recover. Therefore, the strengthening of corporate governance of Thai companies is crucial for the country to get out of this crisis.

Thailand government’s first stimulus package, may have helped limit the negative multiplier effect on household consumption.

The medium-term outlook is sobering, with growth expected at 3.5 percent in 2010 and likely remaining below potential for the next three years. Because the Thai economy is largely dependent on final demand in advanced economies, a return to pre-crisis rates of economic growth (a full recovery vs. a rebound to pre-crisis levels) will require a combination of (a recovery of demand from advanced economies and a rebalancing of the sources of growth to reduce Thailand’s dependence on demand from advanced economies. Neither process is likely to be swift. Recovery from a financial crisis is a lengthy process that involves the rebuilding of balance sheets, and the IMF estimates that half of the losses in the financial system in advanced economies are yet to be recognized.

Despite the rebound, Thailand’s export recovery is still subject to several downside risks

Asean unit-trust move

Despite the rebound, Thailand’s export recovery is still subject to several downside risks. A recent export pickup in East Asia benefits mainly from coordinated and massive policy responses in G-3 economies and China that have boosted their demand for imports, and inventory re-stocking worldwide that followed a swift and large de-stocking in early-2009 as orders fell less than production. These two factors are temporary, as governments have to unwind injections to maintain fiscal discipline and companies resume their normal stocking levels. In fact, data shows that US inventory-to-shipment ratios for computers, electronic products, and electronic appliances started to rise again in August and September, thus leading to weaker new orders . This likely adds pressure on Thailand’s electronic shipments to the US in the coming months.