On strengthening the exchange by embracing sustainability and adhering to global standardsHow would you assess the importance of sustainability and what is SET doing to support its listed firms in improving their performance?
KESARA: Most people agree that sustainability is a key factor for success in today’s business world. Several years ago this topic was not as frequently discussed, but the evolving business environment and successive political and economic uncertainties have pushed companies and individuals to concentrate on sustainability in order to better compete.
The aftermath of the 1997-98 Asian Financial Crisis saw a lot of businesses going bankrupt in Thailand. Since then SET has pushed listed companies to adopt proper corporate governance. With the cooperation of government authorities and the Securities and Exchange Commission, SET established a special unit providing listed companies with guidelines to evaluate their own corporate regulatory systems. Training, educating and giving rewards to listed companies have been key actions for the exchange.
In 2014 we expanded the scope of sustainability to include social responsibilities and environmental issues. We also changed our educational content and the criteria for receiving sustainability rewards. In 2018 we want to integrate innovation on to the checklist, so businesses can better measure themselves using international standards.
Especially as new investment vehicles emerge, what are SET’s priorities regarding innovation and investor protection?
KESARA: Thailand is a free country, and both investors and listed companies can invest offshore. SET must be ready to compete with global exchanges and embrace new products that are available elsewhere; we need to remain innovative and efficient in providing modern products to investors. If Bitcoin trading was allowed, for example, we would already have Bitcoin futures. However, we may see regulatory issues as officials try to ensure their investors are protected.
Today, Thai investors seek high yields and have become more open to risk-taking. This is normal in a low interest rate market. Due to the range of new technologies available, people can invest in any country where high-yield assets are accessible. However, they also need to be made aware of the nature of new products, such as cryptocurrencies. As sector regulators, we have an obligation to educate investors on how to assess higher-risk assets and how to manage risk.
What are the benefits of listing on SET for companies based in other ASEAN states, and how might these benefits be extended to rapidly developing neighbouring countries?
KESARA: Dual listing on SET is now offered to Cambodia, Laos, Myanmar and Vietnam (CLMV). As developing economies, CLVM countries are high-growth markets, expanding by an average rate of 7-10% per year. These countries can do primary or dual listings to raise capital and develop their country with Thai funding. Indeed, we have invested in offshore companies more than we have directly financed projects in Thailand, and many local stakeholders are prepared to invest in high-yield global markets.
However, success has been limited because many businesses do not yet operate abroad. We believe that regarding equities, local firms should not list on other exchanges until they are well known as a global company in the host market. That said, a multinational firm would not need to list outside of Thailand as it would have access to sufficient bank funding.
Looking at benefits, the Thai market provides a greater value due to the fact that entrepreneurs get higher liquidity in terms of trading here than on other regional exchanges. Additionally, we provide more suitability services to listed companies compared with other exchanges. SET is moving onto the international scene, and the quality of its companies and its regulatory standards are beginning to influence other equity markets. Our innovative technologies have allowed SET to grow from a local to a regional exchange.
Kesara Manchusree is the President of Stock Exchange of Thailand (SET)
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