With Thai stock prices mostly trapped in the doldrums over the past year, public confidence in shares has been eroded and this is likely to limit the ability of companies to raise new equity funds.

New equity capital raised by listed Thai firms surged to 328.6 billion baht ($9 billion) in 1998 from 48.1 billion in 1997. But stock exchange officials said the figures greatly distorted the real picture.

They said over 260 billion baht of the equity funds were added to the market last year through private placement of new bank and finance company shares against a minute 3.7 billion baht raised in 1997 when the Thai economic bubble burst.

SET officials said most new equity funds would continue to be raised through private placement this year.

The central bank's FinancialInstitutions Development Fund (FIDF) unit last year converted massive problem loans owed by unviable banks and finance firms into new equity shares that the agency now holds in companies taken over by the state.

The exchange said it listed only one new company in 1998 against five in 1997.

``It would be at least good corporate public relations to float new shares this year but companies need to consider whether it's worth raising funds in the current bearish market,'' said chief analyst Pipat Ronnakiart of Adkinson Securities Plc.

The benchmark composite SET composite index stood at about 391 points on Wednesday against 413 a year ago. Over the last year it had dipped to almost 200 points.

``Stocks may rally occasionally this year but the gains will be liquidity driven rather than fundamentally driven. I guess the index would rise to about 500 by end-1999 if Thailand manages to make progress in economic and financial sector reforms,'' said a senior exchange official who declined to beidentified.

The bourse has been one of the biggest victims of Thailand's worst economic crisis since World War Two.

Partly due to the baht's depreciation since mid-1997, the bourse's total market capitalisation has plunged in dollar terms from a few years ago, to $34.7 billion at end-1998 from its $143 billion peak at end-1995.

The baht stood at about 36.50 to the dollar at end-1998 against around 25 three years earlier.

Thailand's economic turmoil hit the stock market across the board. Most listed firms still feel the pains of heavy foreign exchange losses brought by the baht's devaluation in July 1997.

In 1998 when the Thai economy is thought to have contracted about eight per cent, only 30 per cent of 418 listed firms paid dividends compared with 90 per cent in 1997.

SET senior vice president Sopawadee Lertmanaschai said risk-averse retail investors had fled the market in hordes since the start of the crisis.

Of some 170,000 share trading accounts that investors had opened with brokeragefirms, only 45,000 remained active. SET officials said they planned gradually to wean the market away from the bank and finance sectors, which now account for a heavy 32 per cent of the bourse's total capitalisation.

``We aim to reduce the bank and finance domination, bringing its market capitalisation more in line with its actual contribution to GDP (gross domestic product),'' said SET senior vice- president Patareeya Benjapolchai.

She said more listings of firms in other sectors, especially agro-industries, would be encouraged.