Thailand's bourse set to grow with anticipated IPOs and diversification


The Stock Exchange of Thailand (SET) has outperformed its regional peers in liquidity and initial public offering (IPO) growth in recent years, rising to become the best-performing stock market in the Asia-Pacific region in 2016. The bond market has also been a standout performer, despite concerns over rising numbers of short-term bond defaults, with the segment witnessing an influx of foreign capital during the first months of 2017, following a year marked by significant geopolitical volatility and rising capital outflows. Listed companies remain profitable and derivatives market growth has also been positive, bolstered by rising trade in stock and gold futures. While foreign investment in the securities market is forecast to remain flat in 2017, investment in the bond market should continue to rise, with Thailand increasingly viewed as a safe haven from currency volatility. Several big-ticket IPOs planned for the year should also see the SET meet its market capitalisation growth targets, further supporting steady growth.


Thailand’s capital markets development began during the implementation of the five-year National Economic and Social Development Plan, spanning the 1967-71 period. It called for the establishment of an orderly securities market to better mobilise development capital. Although a private group had already established a stock exchange as a limited partnership, the Bangkok Stock Exchange in 1962, low trading volumes led it to cease trading by the early 1970s. Legislation establishing the Securities Exchange of Thailand was enacted in May 1974, and the new exchange began trading in April of the next year, changing its name to the SET in January 1991. The bourse had 526 listed companies and a market capitalisation of BT15.47trn ($435.8bn) at the end of May 2017.

Today the SET group includes the SET, which is mandated to trade listed securities; the Market for Alternative Investment (MAI), which launched in June 1999 to create fundraising opportunities for smaller and innovative businesses; the Bond Electronic Exchange (BEX), launched in November 2003; and Thailand Futures Exchange (TFEX), which launched in May 2004 for derivatives trading. The TFEX officially merged with the Agriculture Futures Exchange of Thailand in March 2015, and all derivatives trading in the country is now undertaken at the TFEX.

The Thailand Securities Depository offers post-trade services for SET traders, including securities depository, registration and provident fund registration services. The Thailand Clearing House (TCH) clears securities and derivatives traded on the SET, MAI, BEX and TFEX, as well as all over-the-counter (OTC) traded debt instruments. The country’s internet trading platform,, was established in 2000. The group is overseen and regulated by the Securities and Exchange Commission (SEC), which reports to the Ministry of Finance (MoF). The SEC focuses on four priority areas: maintaining market integrity and investor protection; ensuring the stability of the financial system; promoting the competitiveness of Thailand’s capital markets; and expanding access to its capital markets.

Start-Up Support

In an effort to support small and medium-sized enterprises and start-up companies, the SET announced in late 2016 that it plans to launch a new board, designed as a fundraising marketplace for start-ups and smaller firms. The board will utilise a blockchain trading system that removes restrictions on trading units, meaning only experienced traders such as institutional, high net worth, venture capital funds and angel investors will be permitted to trade on the market. The SEC had earlier announced that the new market should be an OTC platform. The new board will not have minimum registered capital requirements for issuers. In contrast, SET-listed companies have minimum registered capital requirements of BT300m ($8.5m) and MAI-listed companies are subject to a BT50m ($1.4m) minimum. SET-listed firms are also required to have a combined net profit of at least BT50m ($1.4m) over the latest two- or three-year period, and profits of at least BT30m ($845,000) during the most recent financial year, while MAI-listed firms must have turned a profit during the most recent financial year. The SET is currently working with relevant agencies to design the new marketplace, which is expected to be open for trading in the third quarter of the same year.

Recent Growth

The SET Index recorded impressive growth in 2016. According to SET data, the SET Index rose by 19.8% to hit 1543 points at the end of 2016, while the average daily trading value rose by 18.6% from BT44.3bn ($1.2bn) to BT52.5bn ($1.5bn) over the year. Market capitalisation also recorded a positive performance, rising by 2.07% to BT14.33trn ($403.7bn). In January 2017 Bloomberg named the SET the best-performing stock market in the Asia-Pacific in 2016, reporting that the benchmark Thai SET50 Index had achieved 18.8% year-to-date returns, ahead of the Jakarta Composite Index’s 16% and the Ho Chi Minh Stock Index’s 14.7% returns. Bloomberg attributed the SET’s strong performance to a sharp decline in global oil prices, which helped widen the country’s current account surplus, in addition to strengthening the baht.

The baht’s stability has attracted foreign investors to local stocks. “Thai and ASEAN capital markets are benefitting from the repatriation of capital which was once directed at emerging markets, such as the [Brazil, Russia, India and China] BRICS economies. As these markets have gradually become non-investment grade, capital is now flowing back into South-east Asia,” Smith Banomyong, CEO of SCB Asset Management, told OBG.

Investor Types

The mix of investors on the SET has been relatively stable over the past four years, and the bourse stated in a mid-2016 report that foreign investors made up the largest segment of investors in the SET by market capitalisation in 2016, at 30.8%, followed by local retail investors (26.1%), local institutes (24.2%) – which includes mutual funds, pension funds, insurance companies and banks – and other local investors (18.9%). Foreign investors’ holding value as a percentage of market capitalisation has fallen in recent years, however, dropping from 35.9% in 2013 to 34.5% in 2014 and 32.7% in 2015. Local retail investment has simultaneously recorded the largest increase in holding by market capitalisation, rising from 21.6% in 2013 to 22.1% in 2014 and 24.8% in 2015.

According to SET, local retail investors accounted for 54% of average daily trading by investor type in the year to July 2016, equivalent to BT26.46bn ($745.4m), compared to 59%, or BT28.47bn ($802m), in 2015, 63%, or BT17.77bn ($500.6m), in 2014 and 57%, or BT16.29bn ($458.9m), in 2013. Foreign investors were the second-largest group of investor by average daily trading value in July 2016 at 25%, or BT12.19bn ($343.4m), compared to 22%, or BT10.94bn ($308.2m), in 2015, 20%, or BT7.83bn ($220.6m), in 2014, 22%, or BT6.71bn ($189m), in 2013 and 24%, or BT5.35bn ($150.7m), in 2012. Proprietary trading made up 11% of average daily trading values for the year to July 2016, or BT5.28bn ($148.7m), compared to 9%, or BT6.35bn ($178.9m), in 2015, 9%, or BT4.2bn ($118.3m), in 2014, 13%, or BT3.89bn ($109.6m), in 2013 and finally 13% in 2012.


The SET has been one of the most liquid markets in the ASEAN, with SET data showing that average daily turnover stood at $1.19bn as of June 2016, compared to $813m in Singapore, $468m in Malaysia, $327m in Indonesia and $148m in the Philippines. Thailand has consistently outperformed all of these countries in average daily turnover since 2010, with only Singapore recording higher volumes between 2010 and 2012. Although affected by the global financial crisis of 2008-09, the market capitalisation of listed domestic companies in Thailand increased significantly between 2005 and 2015, according to World Bank figures. Capitalisation as a percentage of GDP rose from 65.4% in 2005 to 81.5% in 2010, 98.1% in 2012 and an all-time high of 106.5% in 2014. However, this moderated to 88.3% in 2015, the most recent year for which World Bank statistics are available.

IPO Pipeline

According to the SET, Thailand has been one of the most active markets for IPOs in ASEAN, recording 38 new listing in 2013 and 45 in 2014, before moderating in recent years. Total funds raised in IPOs in 2013 stood at $6.45bn in 2013, the highest among ASEAN’s five largest economies, namely, Singapore ($5.18bn), Malaysia ($2.67bn), Indonesia ($1.54bn) and the Philippines ($947m). IPO fundraising fell in 2014 and 2015, although the country maintained its leading position among the ASEAN 5, with $3.45bn in funds raised through IPOs in 2014, compared to $2.61bn in Singapore, $1.69bn in Malaysia, $274m in Indonesia and $328m in the Philippines. IPO fundraising recovered to $4.24bn in 2015, against $341m in Singapore, $1.34bn in Malaysia, $878m in Indonesia and $114m in the Philippines. Thailand missed its IPO-driven market capitalisation targets in 2016 as several major deals were delayed, although the IPO outlook for 2017 is more positive (see analysis).

Listed Companies

On February 27, 2017 Kasikorn Securities reported that it expects the combined net profit for listed companies in Thailand to remain at BT883bn ($24.9bn), or BT95.52 ($2.69) per share. Results for the third quarter of 2016 showed that the combined net profit of listed companies reached BT689bn ($19.4bn). Kasikorn Securities projected an annual dividend payment in the range of BT450bn480bn ($12.7bn-13.5bn), against a market capitalisation of BT15.39trn ($433.6bn), equating to a 3.1% annual dividend yield, with dividend stocks expected to become an increasingly popular investment alternative owing to low returns on other financial assets. Kasikorn Securities projected net profits at listed companies to grow by 7.85% in 2016 to BT952bn ($26.8bn), or BT99.78 ($2.81) per share, based on the average Dubai crude price of $55 per barrel, the baht trading at $1:BT36 and annual GDP growth of 3.5% in 2016 (see Economy chapter). According to the firm, the SET Index’s price-to-earnings ratio stood at 16, compared to an earnings yield gap of 4.75%, reflecting a targeted 1600-point index.


In February 2017 the Federation of Thai Capital Market Organisations (FETCO) reported that investor confidence in the stock market over the following three months was set to improve for the first time in five months, thanks to 2016 earnings growth among listed firms. And by May 2017 FETCO’s monthly Investor Confidence Index showed that investor confidence had risen by 11.7% over the previous month, with the index rising from 90.33 to 100.89. The organisation added that all investor types were bullish, apart from the foreign investor class, which remained neutral.

The construction and banking sectors were identified as the most appealing to investors over the first three months of 2017, while fashion, media, printing and real estate securities were viewed as least promising, according to FETCO. Foreign investors were reported as having a negative view of the agricultural, food and beverage, and retail sectors. Kasikorn Securities projects that capital from both foreign and local institutional investors – the two primary groups influencing the SET Index – were not expected to increase after a tumultuous 2016 marked by currency volatility, expectations of a US Federal Reserve rate hike and the election of US President Donald Trump, which resulted in significant capital outflows from emerging markets.

Capital Flows

The Bank of Thailand (BOT) reported in February 2017 that capital outflows jumped to nearly $24bn in 2016, of which $7.2bn left Thailand in December of that year alone. Total capital outflows from Thailand stood at $5.4bn in 2015. Although international media reported in February 2017 that Thai sovereign notes recorded $2.2bn of capital inflows between January and mid-February 2017 alone, Kasikorn Securities projects foreign investment in the bourse will remain at a relatively low 2.5% in 2017. This followed an earlier forecast from December 2016, which found that anticipated returns from the SET Index would range between 3% and 4% in 2017, compared with expected returns of between 5% and 15% on key foreign stock markets.

According to Kasikorn Securities, low expected returns combined with foreign exchange risks would keep foreign investors out of the Thai stock market in 2017, although the firm noted that foreign holdings of Thai stocks were at a 10-year low as of early 2017, mitigating the impact of a foreign selling spree. It added that the SET Index would be influenced primarily by local investors with no significant changes expected in 2017, and projected that the SET Index would not surpass the upper run of 1600-1620 points, while the lower range was unlikely to drop below 1550-1560 points.

Bond Market Strength

According to the Thai Bond Market Association (TBMA), the country’s bond market has grown significantly since 1997, rising in value from 12% of GDP to 77% as of December 2016. Government bonds account for 36% of the market, followed by BOT bonds (29%), corporate bonds (26%), state-owned enterprise bonds (7%) and foreign bonds (1%). Thailand’s government bond market, valued at 56% of GDP as of September 2016, is larger than many of its neighbours, including China (46%), Hong Kong (43%), Singapore (45%), Malaysia (52%) and South Korea (53%). In comparison, its corporate bond market is the smallest within the same group, valued at 20% of GDP as of September 2016, compared to Korea (76%), Malaysia (45%), Singapore (33%) and Hong Kong (30%).

The value of outstanding bonds in Thailand has risen significantly over the past decade, from BT4.32trn ($121.7bn) in 2006 to BT6.75trn ($190.2bn) in 2010, BT8.99trn ($253.7bn) in 2013 and a high of BT10.85trn ($305.7bn) in 2016, according to the TBMA. Bond market growth has outpaced the securities market and bond trading averaged BT91.84bn ($2.6bn) per day, a 13% increase over 2015. Corporate bond trading grew by 30.4% in 2016 to BT4.33bn ($122m), with the TBMA reporting that corporate bond trading has grown by an average of 40.2% annually since 2011. The market holds significant growth potential for foreign investors as well, with Bloomberg reporting in March 2017 that foreigners owned 8.4% of Thai bonds, compared to 38% in Indonesia and 31% in Malaysia.

Currency Haven

Although capital outflows became a concern for both the bond market and government immediately following US President Trump’s election, the bond market has since witnessed surging capital inflows, including $2.2bn into sovereign notes between January 1 and February 14, 2017, leading the BOT to announce it was monitoring bond market inflows in late February 2017 in a bid to curb speculation. Rising capital inflows in the bond market can be partially attributed to the baht’s relative stability, according to the BOT. Bank officials reported in March 2017 that the baht is increasingly being viewed as a safe haven for by offshore fund managers. It rose 2.7% against the US dollar during the first two months of 2017, while its volatility was recorded at less than 3% in late February, making it one of the most stable in the region.

Short-Term Defaults

Bond markets also offer more favourable financing costs, as evidenced by increased activity in the short-term bond market. In January 2017 Maybank Kim Eng reported that bank loans to corporations grew by 1.4% year-on-year (y-o-y) during the first nine months of 2016, while new corporate debt issuance rose by 14% y-o-y over the same period. Bills of exchange (BE) are the most popular channel for corporations, because they offer more favourable lending terms: issuers generally pay 5% coupons when issuing BEs, roughly half of the 10% rates they would pay on a bank loan. The TBMA also said the BE market is valued at BT220.6bn ($6.2bn), of which 68% are rated.

However, defaults in the BT262bn ($7.4bn) short-term corporate bond market have become a concern, as continuing defaults would reduce demand for these instruments and push issuers back into bank financing. In January 2017 the SEC warned investors about rising investment risks in the corporate BE market after a series of late-2016 and early 2017 defaults.

The commission also noted that while BEs are an important funding channel for companies, the MoF had instructed it to tighten BE regulations after five companies defaulted in a two-month period. Smaller companies will be impacted most strongly by rising interest rates, and issuers could struggle to roll over or repay debts with bank financing, prompting the SEC to request that corporate issuers assess their financial health and liquidity, as well as consider alternative funding channels. Any asset management companies that launch funds to buy BEs are now also required to establish an investment management system to monitor the investments.

Default Risk

More defaults among small and unrated issuers are anticipated by Thai financial institutions in 2017. In a research note released in January 2017, Maybank Kim Eng Thailand said 30 out of 49 issuers with BEs due in the first quarter of 2017 had an Altman-Z score – which predicts the likelihood of bankruptcy – at borderline levels of 1.8. Four of those faced strong default prospects owing to negative free cash flows, high leverage ratios and a weak business outlook. Another crunch point could come in September 2017 when several BEs are set to reach maturity.

However, the TBMA has stated that short-term bonds account for just 13.4% of the total bond market, while BEs in default amounted to BT5bn ($140.9m), or 0.17% of total corporate bonds as of December 30, 2016. Companies that had previously defaulted, including Nation Multimedia Group and E for L Aim, had already redeemed their debts by early February 2017. Others had set aside assets as collateral for BEs, including KC Property with BT360m ($10.1m), while Rich Asia Corporation and Inter Far East Energy Corporation were reported to have liquid assets worth more than their liabilities, meaning debtors were still likely to be repaid.

Derivatives Growth

Derivatives also recorded strong growth in 2016, with the TFEX reporting that the average daily trading volume rose by 42.8% to 285,189 trades, led by growth in stock futures, SET50 Index futures and gold futures. The total number of investor trading accounts rose by 15,709 over the same period to reach 129,284, of which 49% were stock futures, 46% SET50 futures and 4% gold futures. Retail investors made up 53% of new derivatives trading accounts in 2016, followed by institutional investors (37%) and foreign investors (10%). At the end of 2016, open interest had doubled to reach 1.92m contracts, while the TFEX was also active in introducing new products and services, including RSS3 and RSS3-D rubber futures, and three new market makers in June 2016, namely, KGI Securities, Trinity Securities and RHB Securities.

The TFEX reported in May 2016 that the top three most active houses in terms of volume in 2016 were KGI Securities, Phatra Securities and Thanachart Securities. The top three active agents in terms of investor transactions were KGI Securities, Maybank Kim Eng Securities and KTB Securities, while the most active proprietary traders were Phatra Securities, KGI Securities and RHB Securities. In 2017 the TFEX plans to continue boosting liquidity within existing products, with an emphasis on SET50 options, stock futures and RSS3-D futures, as well as promoting the use of stocks as collateral under a new service offered by the TCH (see analysis).

Derivatives Expansion

The TFEX is also actively launching new products in 2017, including new underlying stocks for stock futures, as well as the TFEX’s Gold-D futures. “The rollout of an e-gold online trading platform could boost gold trading volume in the short term as it essentially makes the trading process more integrated and seamless,” Agate Tantachon, managing director of Shining Gold Bullion, told OBG.

Stock futures, one of the most popular TFEX products to be used for directional trade and hedging, recorded a particularly strong performance in 2016, with trading volumes leaping by 72% to hit 33.83m contracts, according to data from the exchange. By the end of the year open interest rose to 1.59m contracts, a 158% increase over 2015. In an effort to capitalise on rising demand in the segment, the TFEX announced in January 2017 that it had introduced a new set of stock futures, adding 24 underlying stocks to boost trading volumes effective January 16, 2017. This brought the total number of underlying stocks to 93, covering a broad spectrum of economic sector. The exchange is also expected to continue focusing on improving liquidity, as well as conducting new education and marketing activities in 2017.

Chavinda Hanratanakool, CEO of Krung Thai Asset Management, told OBG, “While Thai investors are often conservative, there exists a need to deepen the products being offered through diversifying both risk and product types, and the demand for niche products is meaningful. One such product is a [Cambodia, Laos, Myanmar, Vietnam and Thailand] CLMVT fund which invests both directly and indirectly into the stock markets of high-growth neighbouring economies.”


Although geopolitical volatility and external headwinds could weigh on capital markets growth in 2017, particularly on the foreign investor class, the SET has benefitted from Thailand’s macroeconomic and currency stability, with IPOs and profit growth at listed companies expected to support further expansion in 2017. While short-term bond defaults could be a concern, particularly in the second and third quarters, the bond market outlook remains positive, further supporting long-term growth and market maturation.

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The Report: Thailand 2017

Capital Markets chapter from The Report: Thailand 2017

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