Nearly 47 years after its inception, the Stock Exchange of Thailand (SET) is transforming its business model to expand its product range and build a more inclusive capital market that engages and benefits a wide array of investors.
Pakorn Peetathawatchai, president of the SET, said liquidity, a diverse set of products and facilitative infrastructure are the SET's key growth drivers. The bourse has been the main fundraising source for the private sector and remained the region's most liquid stock market for seven consecutive years.
NEW MARKETS
The transformation aims to enhance the SET's competitiveness in both traditional and digital markets. The bourse plans to launch a variety of new products including depositary receipts (DRs), or a negotiable financial instrument that allows investors to hold shares of foreign companies.
Two new exchanges are also planned: LiVE Exchange and Thai Digital Assets Exchange (TDX).
He said the two exchanges will add variety to the SET Group's product range, which currently consists of three traditional exchanges: the SET, a trading platform for common stocks, preferred stocks, unit trusts, real estate investment trusts, derivative warrants, exchange-traded funds (ETFs) and DRs; the Market for Alternative Investment (MAI), a funding platform for small and medium-sized enterprises (SMEs); and Thailand Futures Exchange (TFEX), a derivative market.
LiVE Exchange is a fundraising platform designed to support SMEs and startups, providing them with a source of capital to expand their businesses as an alternative to bank loans. It is expected to be launched at the end of this quarter.
Mr Pakorn said regulations and conditions pertaining to listing and trading on LiVE Exchange will be different and more flexible than those implemented on the SET and MAI.
The Securities and Exchange Commission has issued more relaxed regulations to support SMEs and startups raising funds on LiVE Exchange, such as an exemption from appointing a financial adviser when listing.
The rules took effect on Jan 16 this year, legalising initial public offerings and listing on LiVE Exchange.
DIGITAL OFFERINGS
TDX is a digital exchange for digital token trading that is expected to start operations in the second half of the year, he said.
Mr Pakorn said the SET will focus more on investment token products in the digital asset market because the products are new and considerably more stable than cryptocurrencies, which have no underlying assets.
Examples of investment tokens include Siri Hub Investment Digital Tokens, the country's first real estate-backed token.
"We believe digital assets will not replace traditional assets, but will complement them as they grow together. Each one has its own advantages and disadvantages and users or investors will choose to participate in the markets that best suit their needs," he said.
Mr Pakorn said traditional markets will remain crucial to the economy and maintain their role as the main source of fundraising for Thai firms, as their strength lies in their stability and trustworthiness.
Several institutional and retail investors rely on the SET when considering investment in major companies as they can rest assured they are well-protected, he said.
The traditional and digital markets are likely to grow together and benefit each other as they serve issuers and investors in different circumstances, Mr Pakorn.
NEW PRODUCTS
In addition to new exchanges, the SET also wants to diversify its product line to attract more investors, especially through financial instruments that invest in foreign stocks in 2022.
According to data from the SET, the market cap of the primary and secondary markets increased by roughly 250 billion baht for 4-5 years.
In the past two years, the SET ranked in the top 10 in Asia and top 20 in the world in terms of market cap.
The SET's market cap rose by 13 trillion baht to 20 trillion in the past decade with average growth of 500 billion baht per year.
Mr Pakorn said the Thai capital market has maintained sustainable growth for more than 20 years. The private sector raises roughly 20 trillion baht through the stock market, 13-14 trillion from bond issuance and 15-16 trillion through bank loans.
Stocks and bonds have long been the backbone of the Thai economy since the 1997 financial crisis and the main source of private funding.
He said investors interested in emerging markets are keen on Thailand because the SET has high-quality stocks and securities products with good potential for growth.
Among them are businesses with positive compliance records in terms of environmental, social and governance criteria.
Last year 13 Thai listed firms were included in the Dow Jones Sustainability World Index as leaders in their industry, while 25 Thai companies were included in the Dow Jones Sustainability Index.
ATTRACTING INVESTORS
Mr Pakorn said maintaining growth momentum is key to attract investments from all groups, helping to make the Thai bourse more attractive to companies.
"Liquidity is very important for the growth of the Thai bourse as it allows the business sector to use the capital market as a source of fundraising for expansion and economic growth," he said.
Mr Pakorn said the bourse aims to maintain its growth and liquidity by attracting large foreign companies to list by simplifying the listing rules for international companies and businesses in S-curve industries, which are expected to be key drivers of the Thai economy.
"We are trying to diversify our products by convincing foreign companies, startups and SMEs to list that have high potential to grow in the future," he said.
On the investor side, the SET is trying to expand three groups of investors: foreign, individual and local institutional.
The number of individual investors on the SET increased by 700,000 accounts in 2020 and 1,500,000 accounts in 2021, exceeding the typical average of 100,000-200,000 accounts per year.
Mr Pakorn said the surge in individual investors can be attributed to a simpler account opening process through online systems.
Investors can now open trading accounts and verify their identities online through an electronic know-your-customer process.
In addition, newly listed companies have started to distribute more shares directly to individual investors with the assistance of SET subsidiaries such as Thailand Securities Depository and Settrade, the SET's trading platform, that support randomisation, making the process more efficient.
Without a good platform, it would be difficult to expand the investor base, he said.
Mr Pakorn said the SET needs to attract a new generation of investors with more products such as fractional DRs, facilitating investment in foreign stocks and exchanges without the help of brokers.
For institutional investors, the SET provides products such as ETFs, DRs, mutual funds and new indices such as a sustainability index and industry index.
For mutual fund trading, the SET added mutual funds to the Settrade system, making the service more convenient, he said.
