Kesara Manchusree, President and CEO, the Stock Exchange of Thailand (SET): Interview

Interview: Kesara Manchusree

How would you assess the overall performance of the SET over the past few years?

KESARA MANCHUSREE: The SET has largely maintained its strong performance over the past few years. Market capitalisation as of the end of 2015 stood at $349bn, slightly behind the Bursa Malaysia. Initial public offerings (IPOs) have boomed recently, with more than 40 IPOs launching in each of the past few years in a variety of structures including common stocks, holding stocks, real estate investment trusts and infrastructure funds. Market performance is on par with the region, as the SET index shrank by about 14% at the end of 2015, but is still outperforming the MSCI Emerging Markets Index, the regional benchmark, as well as the Singaporean bourse. In terms of liquidity, the SET is top in ASEAN at $1.24bn in 2015 with roughly 59% retail and 19% institutional investors. Unlike other regional exchanges, the SET boasts a diversified trading base, with retail, institutional, proprietary and, of course, foreign investors.

Although net foreign flows for 2014 and the first half of 2015 were negative at -$1.09bn and -$4.37bn, respectively, foreign shares and non-voting depository receipts outstanding stood at 32.7% of market capitalisation. Over the last decade, foreign holdings have ranged from 32.5% to 36%, which suggests that most are for the long term.

Sectors that reported profit growth in 2015, as a result of a government stimulus programme to boost spending, include information and communication technology, commerce, food and beverage, health care services, automotive, tourism and leisure, while the automotive-parts segment recovered thanks to exports and effective cost management. The sectors that have performed less well are those that are reliant on falling hydrocarbons prices. Continued recovery in the US, along with high growth in Cambodia, Laos, Myanmar and Vietnam (CLMV), will boost Thai firms’ exports and investment returns. The Thai baht depreciation should also help to boost exports, while a fiscal stimulus will lift domestic spending.

What role can Thailand play in the development of its neighbours’ nascent capital market sectors?

MANCHUSREE: The SET is one of the most advanced bourses within the region. Of the SET100 firms, 72 are investing abroad – 88% of these in ASEAN and 69% in CLMV. In 2014, 24 of the SET100 firms that report their sources of revenue derived more than 40% of revenues from abroad. Thai capital markets are supporting regional growth by channeling funding to investments abroad and to infrastructure projects to boost regional connectivity. Firms have traditionally relied on bank credit to fund expansion, but capital markets offer a greater variety of instruments to serve the needs of firms.

Policies that can facilitate firms’ investment and fundraising in CLMV include putting in place a mechanism to facilitate investment in foreign securities listed offshore through depositary receipts, which represent deposited foreign securities, including those listed on exchanges in CLMV countries. Furthermore, policymakers are setting criteria to create a CLMV asset class by allowing Thai mutual funds to invest in listed securities in CLMV countries up to 100% of the net asset value with specified diversification, which will help promote competitiveness for the Thai mutual fund industry as well. Infrastructure trusts are being created as a new fundraising mechanism in Thailand to develop offshore infrastructures, including those in CLMV countries.

Lastly, the SET is encouraging foreign companies to list by enacting primary listing regulations for those that do not have their shares listed on any exchange and secondary listing regulations for those that have their shares listed on other exchanges already. With all the various options available, the diverse capital markets of the region can therefore grow together.