Positive economic forecasts contribute to record stock and bond performance in Thailand

Bolstered by improved political stability, positive growth and consumption outlooks, and rising investor confidence, market capitalisation in Thailand rose to pre-1997-98 Asian financial crisis levels for the first time in early 2018 as the Stock Exchange of Thailand (SET) Index hit an all-time high in January.

Capital markets authorities have moved to position Thailand as the de facto regional trading centre in ASEAN, enacting reforms to SET’s settlement cycle and encouraging listed companies to register on domestic and international sustainability indices to improve investor confidence. Other changes have been less popular with the private sector. Moves to regulate the nascent cryptocurrency industry and initial coin offerings (ICOs), for example, include taxes that could see Thailand fall behind neighbouring countries, such as Singapore, in cryptocurrency development. Nonetheless, listed companies remain resilient and profitable, supported by rapid growth in the corporate bond market and a spate of anticipated initial public offerings (IPOs), as well as mergers and acquisitions (M&A), forecast to peak in 2019.


The development of domestic capital markets began in the late 1960s, but the Securities Exchange of Thailand – later renamed SET – was not established until 1974. The SET group comprises four platforms: SET, which trades listed securities; the Market for Alternative Investment (MAI), established in 1999 for small and medium-sized enterprises (SMEs) and innovative companies; the Bond Electronic Exchange, launched in 2003; and the Thailand Future Exchange, established in 2004, which merged with the Agriculture Futures Exchange of Thailand in 2015. That same year the authorities also established the Thailand Sustainability Investment (THSI) index, a domestic ranking of companies based on their environmental sustainable governance performance.

The Securities and Exchange Commission (SEC) operates under the Ministry of Finance (MoF) and holds regulatory oversight for all domestic capital markets activity. Meanwhile, services are undertaken by a variety of organisations. The Thailand Securities Depository Company acts as a central depository for equity and fixed-income debt instruments, provides securities registration, and prepares and maintains registry books. The Thailand Clearing House (TCH) clears securities and derivatives traded on SET’s four platforms, as well as over-the-counter debt instruments. As the central counterparty to trading activities, the TCH guarantees clearing and settlement for all parties in a given trade.

Recent Growth

SET has maintained steady momentum in recent years, serving as a key driver of the economy. In its annual report on performance in 2017, the exchange reported that the market capitalisation of SET and MAI increased to BT17.9trn ($518bn), up 15.6% from 2016. Over the year, SET and MAI recorded a 2.81% and 1.45% dividend yield, respectively. The combined average daily trading value of the two markets was BT50.1bn ($1.45bn). While this was down somewhat from the BT52.5bn ($1.52bn) recorded in 2016, Thailand maintained the highest trading liquidity in ASEAN for the sixth consecutive year. Net profits grew by 30.4% in 2016, while 27 securities and secondary market IPOs yielded more than BT450bn ($13bn).

Other performance indicators remained strong in 2017, with the SET Index rising by 13.66%, or 210.77 points, to 1753.71 on the last day of trading that year. The bourse surpassed the 1700-point threshold on October 10, 2017, reaching 1706.95 points. That day saw $2.4bn of trading value, with foreign and institutional investors purchasing $69m and $54m worth of shares, respectively. This indicates that foreign investors are increasingly shifting their funds from neighbouring countries to Thailand, according to SET.

Foreign participation in trading activities has grown considerably in recent years. Total foreign buying rose from BT1.95trn ($56.4bn) in 2012 to around BT2.57trn ($74.4bn) in 2013, before moderating to BT2.22trn ($64.3bn) in 2014 and rebounding slightly to BT2.29trn ($66.3bn) in 2015. Following the somewhat lower levels, foreign buying surged to BT3.3trn ($95.5bn) in 2016 and an all-time high of BT3.67trn ($106bn) in 2017.

Although heavy capital inflows were a precursor to the Asian financial crisis of 1997-98, the Investment Analysts Association reports that SET’s rapid growth is not indicative of a bubble or overheating (see Banking chapter). The association instead attributes this strong performance to high liquidity in global financial markets, low interest rates worldwide and Prime Minister Prayut Chan-o-cha’s announcement that national elections would be held in November 2018. However, optimism about the potential upcoming general elections has since been dampened, as there have been indications that they might now not take place until May 2019.

Gaining Momentum

SET’s strong performance continued into 2018, when it reached a record of 1778.53 points on the first day of trading that year, up 1.42% from the last day of trading in 2017. Total trade volumes hit BT88bn ($2.5bn) on the first day of trading, with market capitalisation simultaneously rising to an all-time high of BT18.2trn ($527bn). The previous index peak was 1753.73 points, set in January 1994, marking the first time SET had exceeded this point since the 1997-98 Asian financial crisis. The authorities attributed this strong performance to confidence in the economy and listed companies.

Markets were also profitable in 2017 and early 2018, and SET and MAI’s combined 487 listed companies paid a total of BT478bn ($13.8bn) in dividends in the year to March 21, 2018, amounting to an average yield of 3.41%. According to Kesara Manchusree, former SET president, companies listed on SET – excluding property funds, such as real estate investment trusts (REITs) and infrastructure funds – paid BT473bn ($13.7bn) of dividends during the year, against the comparatively low BT4.82bn ($140m) for the 87 MAI-listed firms. Energy and utilities companies accounted for 52% of dividends paid, followed by banking and ICT. Among property funds, REITs yielded an average 5.97% and infrastructure funds 7.04% over the same period.

The top-five SET-listed companies by dividends were PTT, Advanced Info Service, Siam Cement, Siam Commercial Bank and PTT Global Chemical, with a combined BT132bn ($3.8bn) of dividends, or 28% of total dividends. Leading players on the MAI were Forth Smart Service, Brooker Group, Bangkok DecCon, Thai Solar Energy and Fortune Parts Industry, with BT1.47bn ($42.6m) of collective dividends.

IPO Record

The year 2017 also saw historic IPO activity, with the country recording its largest IPO in 10 years when Gulf Energy Development raised $733m in late November that year. The deal was also the largest domestic private corporate IPO to date, benefitting from investors including the Asian Development Bank, which subscribed to 64m shares worth $88m. Then, in December 2017 international press reported that the announcement of the general elections, as well as the funeral of the late King Bhumibol Aduyadej, had contributed to a renewed sense of political calm, stoking investor confidence following a coup that contributed to a 50% decline in primary issuances in 2014.

Domestic IPOs raised $3bn in 2017, doubling 2016 levels, with offerings including Gulf Energy – Thailand’s third-largest power producer – and TOA Paint. The latter raised BT12.2bn ($353m) from its September IPO, performing well as a result of a positive GDP growth and consumption outlook for 2018. Multinational investment bank UBS told industry press in December 2017 that it expects strong capital markets growth in 2018 due to healthy international investor interest. This came on the back of a 32% rise in Gulf Energy’s shares on December 6, 2017, their debut trading day, to BT59.50 ($1.72) per share, up from the IPO price of BT45 ($1.30).

Indeed, foreign investors bought BT1.87trn ($54.1bn) of SET shares during the first four months of 2018, up 68.5% year-on-year (y-o-y) from BT1.1trn ($31.8bn) in the same period of 2017. Outgoing investment also saw growth on SET, with foreign investor outflows elevated in January-April 2018: there were BT1.95trn ($56.4bn) in sales of foreign shares, against just under BT1.1trn ($31.8bn) from the first four months of 2017.

Near-term Trends

In their “Global Transactions Forecast 2018”, published in January that year, Baker McKenzie and Oxford Economics project that Thailand’s dealmaking cycle will peak in 2019, with the value of IPOs and M&A set to climb steadily until 2020. The firms reported that M&A activity remained resilient in 2017 despite tight credit conditions and an uncertain political environment, with a global upturn expected to support new manufacturing and tourism deals. Domestic M&A activity is anticipated to hit $10bn in 2018 and 2019, with 129 M&A deals scheduled for 2018, up from 106 in 2017. The value of deals is forecast to increase from $6.4bn in 2017 to $9bn in 2018 and $10.6bn in 2019. IPOs are also set for strong performance, with Baker McKenzie projecting the value of IPOs to peak at $5bn in 2019. Outside of IPOs, SET data shows that listed companies raised BT4.06bn ($118m) of capital in June 2018.

Bond Market

In addition to IPOs and stocks, the bond market has performed well, with the Thai Bond Market Association (TBMA) reporting robust growth over the previous two decades. The bond market has grown from being equivalent to 12% of GDP in 1997 to 75.8% in December 2017. Equity and bank loans were worth 117% and 98% of GDP, respectively, in that month. The outstanding value of the bond market has expanded from BT4.32trn ($125bn) in 2006 to BT9trn ($261bn) in 2013 and BT11.6trn ($336bn) at the end of 2017. The TBMA reported that it grew by a further 1.85% in January 2018 to BT11.8trn ($342bn). Government bonds account for the plurality of this total, at 38%, followed by corporate bonds with 28%. Thailand’s corporate bond market is smaller than many of its neighbours’, with the value of corporate bonds equivalent to 20.3% of GDP in September 2017, against some 53.1% for government bonds. In comparison, corporate bonds represented 29.4% of GDP in Hong Kong, 33.4% in Singapore, 44.7% in Myanmar and 74.1% in South Korea.

Although they comprise a relatively small portion of the market, corporate bonds have outpaced corporate lending, with the TBMA reporting that corporate bond issuance had a compound annual growth rate of 13% between 2007 and 2017, against 5% for lending. The average daily trading value of corporate bonds increased by 31.8% y-o-y in January 2018 to reach BT6.71bn ($194m), and the TBMA reports that since 2011 the daily trading values of corporate bonds rose by an average of 38% per year, from BT800m ($23m) to BT5.09bn ($147m) in 2017. With steady macroeconomic expansion forecast in 2018 on the back of infrastructure investments and improving consumption, the corporate bond market holds considerable potential.

Strategic Planning

On the back of recent growth, the authorities have been looking forward. In January 2018 Rapee Sucharitakul, SEC secretary-general, unveiled the SEC Strategic Plan 2018-20 to improve competitiveness using financial technology (fintech), as well as promote inclusion, sustainability, good governance, and fair and effective enforcement of regulations. At the announcement, Rapee noted that Thailand’s ageing society has altered market dynamics, with stakeholders moving to ensure investors will generate yields sufficient for retirement, and the commission increasingly promoting awareness of the importance of long-term savings.

The three-year plan focuses on four strategic themes: driving competitiveness and inclusion; positioning Thai capital markets as the regionally preferred venue; promoting governance and good standards to protect consumers; and developing new tools to empower investors. Fintech is emphasised as a tool to add value, improve efficiency, promote access to information, introduce services targeting new investors and develop a cost-effective market infrastructure to lower operating costs. The SEC also plans to deploy regulatory technology to improve supervision and cybersecurity.

ICO Regulations

As part of a drive to adapt to shifting market dynamics, the government has moved to regulate cryptocurrency and ICOs. In September 2017 the SEC adopted a bullish attitude towards ICOs, announcing plans to both encourage market access for tech start-ups with high potential and realise the potential that ICOs have to fulfil start-ups’ funding needs. However, as ICOs and cryptocurrency have been used for fraudulent activity in certain cases, the SEC stated that it is considering “appropriate approaches” to protect investors from ICO scams, welcoming input from the private sector to develop strategies. The lack of regulation initially caused some obstacles. In February 2018 the Bank of Thailand prohibited financial institutions from engaging in cryptocurrency and ICO activities. Following this, the Thai Digital Asset Exchange announced it was suspending ICO registrations after its bank account was closed for having an improper licence, with industry press reporting that the exchange had suspended six pending ICOs. In response to these gaps, the government issued draft legislation on cryptocurrency and ICOs in March 2018.

Digital Asset Tax

The draft legislation proposed a 15% capital gains tax on digital-asset profits, including cryptocurrency, digital tokens and other forms of electronic data, according to the MoF, with the government also requiring cryptocurrency traders to register their activities with relevant authorities. A spokesperson for Somkid Jatusripitak, the deputy prime minister, told local press that two royal decrees were expected to be forwarded to the Council of State, after which the Cabinet would vote on the regulations. In April 2018 Apisak Tantivorawong, the minister of finance, announced that the government had finalised a comprehensive tax framework for cryptocurrency trading and investment practices to be effective from May 14 that year. Under the regulations trades are subject to 7% value-added tax, and investment returns are levied a 15% capital gains tax. All digital-asset market participants were required to register with SET within 90 days of the effective date of the new regulations. Some stakeholders were unhappy with the rules, arguing that new taxes would stifle growth and dampen investor sentiment. Korn Chatikavanij, former finance minister and chairperson of the Thai Fintech Association, told OBG that regulators’ conservative approach could see more investors choose Singapore over Thailand as a location for cryptocurrency start-ups, due to the former’s more conducive legislation.

Best Practices

The second pillar of the SEC Strategic Plan 2018-20 seeks to position Thailand as a leading regional investment hub by streamlining the IPO process, with procedures for pre-fundraising screening. Key elements include establishing an effective trade monitoring system and strengthening legal enforcement. The SEC also plans to align Thailand with international best practices to promote competitiveness and eliminate regulatory barriers to cross-border collaboration.

To support these efforts, in March 2018 SET implemented a T+2, or two-day, settlement cycle to reduce settlement risks and improve competitiveness. Prior to this, the exchange had used a T+3, or three-day, settlement cycle, although the bond market and futures exchange operate on T+2 and T+1 cycles, respectively. This has brought SET more in line with European and American securities markets, and could offer a competitive advantage over the Singapore Exchange, which still uses a T+3 cycle.

Shortening the settlement period for securities trading is also expected to facilitate future deployment of blockchain-based securities trading. Blockchain – a distributed-ledger technology enabling almost instantaneous transaction settlement – is already widely used for cryptocurrencies. Its decentralised verification system also allows users to bypass banks and clearing houses, which could significantly cut business costs.

Sustainability Drive

The third pillar of the SEC strategy targets good governance with an emphasis on preventing conflicts of interest between companies and their subsidiaries. Meanwhile, the fourth aims to improve investor education, consumer protections and investor rights by supporting independent investment advisory businesses, as well as developing more efficient dispute resolution and enforcement mechanisms. To this end, SET stakeholders are increasingly pushing listed companies to improve their sustainability practices, including by encouraging Thai-listed companies to join the Dow Jones Sustainability Indices (DJSI). Launched in 1999 as the world’s first global sustainability measure using economic, environmental and social criteria, the DJSI serves as a benchmark for investors seeking to integrate sustainability into their portfolios.

In its 2017 Sustainable Stock Exchange report, the Corporate Knights ranked SET 10th out of 55 stock markets worldwide. This was a sharp improvement from its 40th-place ranking in 2013, with SET the only Asian exchange in the top 10 in 2017. In a press release announcing the results, the Thai embassy in Washington, DC reported that SET had significantly shifted its reputation since the 1990s, as regulators and private stakeholders had made notable improvements since the 1997-98 Asian financial crisis.

Keeping Pace

Much of the improvement can be attributed to a concerted effort among the SET leadership to increase the number of Thai companies listing on the DJSI. In October 2017 Kesara told regional press that the number of Thai firms listed on the DJSI exceeded that of any other country in the region, with 17 companies registered, up from 14 in 2016. In contrast, Singapore had two DJSI-listed companies in 2017, while Malaysia had one.

Regional media sources argue that listing on the DJSI makes a company more attractive to investors because it indicates the firm is proactively addressing long-term risks and opportunities. Proponents say that more companies listing on DJSI will lead to higher investor confidence, which would make sustainability an important facet of the development of capital markets. Although, unlike in Malaysia and Singapore, listed companies in Thailand are not obliged to report their sustainability performance, major conglomerates have increasingly recognised the benefits of DJSI registration. Siam Cement joined in 2008, followed by national oil and gas company PTT and five of its subsidiaries. In 2016 Kasikornbank was the first South-east Asian bank to join the DJSI, by which point Thai Oil and Thai Union, a seafood and food manufacturing company, had already been members for three and four years, respectively.

Despite some progress, less than one-third of domestic listed companies reported their sustainability performance in 2017. To address this, SET introduced various reforms, including a self-assessment tool for companies to gauge their operational sustainability and outreach programmes for SMEs to identify their relevant sustainable governance criteria. While SET increased its number of THSI-listed companies from 51 in 2016 to 58 by the end of 2017, Kesara told regional press in December 2017 that sustainability reporting is unlikely to become mandatory in the near term.


SET has maintained momentum. In its April 2018 CEO survey SET reported that the private sector expects 3-4% GDP growth that year, despite baht appreciation, rising labour costs and high household debt (see Banking and Economy chapters). At the end of the first half of 2018 the SET Index closed at 1607.27, with 12.1bn shares valued at BT48.3bn ($1.4bn). In January 2018 local press reported that brokers predict that the market could hit 1900-2000 points in 2018 as a result of rising investor confidence, the stable broader economic outlook, and a strong public investment programme.

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The Report: Thailand 2018

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