Interview: Charamporn Jotikasthira
How is the SET ensuring diversification through funding instruments such as real estate investment trusts (REIT) and infrastructure funds?
CHARAMPORN JOTIKASTHIRA: The SET is continuously trying to create new types of fundraising and investment vehicles, which benefit securities issuers and investors. Infrastructure funds and REITs are the two latest additions to the Thai capital markets. Those raising funds can benefit from having access to capital at a low cost and flexibility in terms of structure of securities. By adding infrastructure funds and REITs to their portfolios, investors will be able to profit from more stable revenue streams over a longer term compared to common shares. Rules and regulations have been put in place to support the listing of these vehicles, while the government has provided incentives to encourage their listing, including exemption from dividend tax on infrastructure funds.
Through infrastructure funds, the SET is gearing to support government development projects expected to see investments totalling $70bn in the next seven years. The first fund brought to market was the Bangkok Mass Transit System’s Mass Rail Transit Growth Infrastructure Fund. It is the largest initial public offering (IPO) on the SET to date, raising $2.1bn from local and international investors. The IPO was oversubscribed and saw an 11% price increase on its first trading day. Many developers have shown interest via REIT instruments, with the first REIT listings taking place in late 2013.
What kinds of incentives can encourage IPOs that will emerge as liquid stocks in 2014? How is legislation being tailored in this regard?
CHARAMPORN: Since 2012 the SET has been working closely with the Thai Securities and Exchange Commission (SEC) to amend rules that will facilitate new listings on the market. The holding company listing rule has been introduced to help Thai companies that have a major investment focus abroad, particularly in the Greater Mekong Subregion (GMS), and that need additional capital to expand their business in the region.
Companies with a market capitalisation higher than BT5bn ($163m) were permitted to list in 2013, subject to approval of the SEC. This allows firms with good profitability prospects to list on the SET. Indicators for the Thai capital market were also strong. Liquidity measured by value traded were the highest in ASEAN, including Singapore, which is the regional financial centre.
The SET index performed remarkably well over the past few years, with a high growth rate of 52% since the start of 2012. These strong fundamentals have attracted IPOs to the market, and as of the second quarter of 2013, there were 36 upcoming IPOs in the pipeline.
How will a South-east Asian trading platform boost commercialisation and retail investment?
CHARAMPORN: ASEAN exchanges are working together to promote the region as an asset class to boost trading across all ASEAN exchanges. We are developing new ASEAN indices and index-based products. The exchanges are working closely with the Financial Times Stock Exchange (FTSE) to develop indices that will cover all seven ASEAN exchanges’ stocks, rather than just the current five. We expect to launch a broad-based index and the ASEAN Star index in 2014. We are also considering issuing products based on these indices.
Developing post-trade links to reduce costs will help all ASEAN market participants and reduce transaction costs. Finally, we are considering network expansions to target and cater to institutional investors who have not invested in the ASEAN region previously.
To boost retail investment we must educate local brokers and have them be key participants in this initiative. We also plan to increase investors’ awareness of foreign securities through various media and road shows. Investors can access the list of ASEAN Star securities and research foreign securities through the ASEAN Exchange’s website and disseminate information including stocks, brokerage firms and individual exchanges.
Social media will also help spread awareness about the regional trading platform and opportunities therein.
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