OBG talks to Asvini Tailanga, Chairman of the Executive Board, Thanachart Securities

Interview: Asvini Tailanga

How will the implementation of a new trading platform at the Stock Exchange of Thailand (SET) affect the market in 2012?

ASVINI TAILANGA: The existing platform has been in use since 1991-92 and some adjustments were made six years ago. The current move will not only affect the speed and latency of the SET, but will also revisit a number of trading regulations. We need to see if the existing regulations need to be updated to synchronise the SET with international markets.

I think re-examining the need for potential updates is a positive step. As far as trading speed is concerned, the new platform will help, however, trading volumes are also a consideration and we will see how this changes going forward.

What is the scope for cross-border listings from neighbouring countries on the Thai market?

ASVINI: There are two concerns here, one related to taxes and the other related to regulations, and both affect mergers and acquisitions (M&A) in Thailand. These do not enable cross-border listings, and some attempts to complete a cross-border listing have failed because of the M&A law and the tax issues. These regulations need to be revised if we want cross-border trading and dual listing to succeed. I think, all in all, there is the space for Thai authorities, the private sector and others to examine at how we can compete in ASEAN – and this is a good start. We see a number of obstacles in connecting to other countries and we should address this. For instance, rules that result in dual taxation between Cambodia and Thailand hinder cross-border trading, and these should be abolished.

What is the forecast for initial public offerings (IPOs) and new listings on the SET?

ASVINI: Three major listings are expected in 2012 and the first has already happened: Asia Aviation launched in May, having been delayed since 2011. This is a big issue, worth approximately BT4.5bn ($143.55m), however, with a total capitalisation of $560m. We also anticipate some listings by agribusiness firms in 2012. I think everyone is working to overcome the various challenges together. You will see more IPOs in 2012 than in the previous two years, and we are optimistic about fresh listings. I also think many firms are interested in listing on the Market for Alternative Investments.

What is the anticipated investor response to the launch of new derivatives contracts in Thailand?

ASVINI: The gold futures market is one that has attracted a number of investors in Thailand. The more complicated the product is, the less enthusiastic investors will be. Gold is simpler because it has been the focus of attention for Thai individuals for so long, and it is easier for them to understand.

Oil futures are more difficult for investors to manage, as are bond and debenture markets – these are not markets for individual investors. However, the launch of currency futures in 2012 will likely be welcomed by the market, as it provides an alternative investment for market players that can be used for portfolio diversification and currency risk hedging. Despite this, I think gold will continue to dominate the derivatives market, even with new instruments.

What is the outlook for foreign interest in the SET, given the appeal of emerging markets?

ASVINI: Emerging markets are a target for investors in 2012, and Thailand among them. The 5% GDP growth in 2012 resulted from a low base the previous year, so it is not that great in real terms. We think the level of foreign interest is subject to valuations: so, once we reach target valuation we will see outflows, followed by renewed inflows. It is very riskon, risk-off. As of April 2012, we have a number of stocks in value-enhancing sectors that have potential, but the overall market has reached fair value.