What new initiatives is Philip Securities involved in? How successful has the deployment of Horizon Software’s trading platform been?
KULVANICHPISIT: Right now, one of our major initiative is the signing up of a new vendor, called Horizon, which is a French vendor providing a trading platform. The main purpose is to tackle the problems of Internet trading. We prefer to have a stable and fast system, such as the one provided by Horizon. This will be combined with the trading platform of the Stock Exchange, called Cinnober. Phillip expects to offer a more advanced platform that can introduce features that Thai investors have not experienced before. We hope to be the first stock broking company to launch this trading platform for our clients and raise the standard of trading for Thailand. The expected timeline for the platform to be launched on Internet will be Q1 of next year. This is what Phillip is developing together with Horizon.
Do you have any specific growth targets for next year?
KULVANICHPISIT: Our target for next year is to reach 3.5% of the market share in the equity segment. For the fund side, this year we registered a growth from 3bn Baht ($98m) to 5.5bn Baht ($179m) and we are looking at reaching 8bn Baht ($260m) next year. For the private fund, which we started with less than 10m Baht ($300,000) 2 years ago, we have now reached about 600m Baht ($20m) with about 160 clients. Our selling point is that we have a low entry level. The first private fund can start with only 1m Baht ($32,544) and then expand by word of mouth. I think next year our private fund should be able to achieve 1bn Baht ($33m).
Where do you see the best equity investment opportunities in the region?
KULVANICHPISIT: In my opinion, the best investment opportunities in the region are in Thailand, mainly because we still give the best dividend in the market. Our dividend for next year will still be around 3.8% and the expected P/E for 2013 will still be around 12x. We still have an expected growth of around 12% to 13%. These factors place us a in a good position for investment opportunities within the region.
How has market liberalization impacted Thailand’s securities companies? Where do commission fees stand today?
KULVANICHPISIT: Thailand started to liberalize its commission rates at the beginning of this year. The liberalization of the commission rates has resulted in a market which is more open to competition. Fortunately, the competition remains for the top range of clients, the majority of whom are high frequency traders. ASCO (Association of Securities Companies) still has a very strong unity and the President of ASCO can still bring everybody together to have some consensus in playing fairly and without bringing the rate down to the medium and retail clients. So far the rate has been quite stable and at the moment we can freely negotiate the commission when it is over a trading volume of 20 million per day. Thus, you can go as low as 200 Baht ($6.52) per million, which is about 2 basis point per million for a trading volume which is over 20 million.
How have volumes for more sophisticated financial instruments such as derivatives and futures grown in Thailand? What are your projections for the future?
KULVANICHPISIT: From 2010, we witnessed a noticeable jump in the trading volumes of derivatives and futures. In fact, we shifted from a turnover of 18,000 contracts per day to about 40,000 contracts per day, mainly because gold futures have started to come into the market only recently. Thus, there is a big jump from 2010 to 2011. However, from 2011 to 2012, the turnover for this market grew moderately, because it jumped from 40,000 contracts to 41,000 contracts. There are a lot of new products coming in the index segment, such as energy futures and currency futures, like the Thai-US dollar coming in. These can still push the total volume at a significantly increasing level in comparison to when Gold Futures (GF) were launched into the market. When we introduced GF to the market, there was a big group of investors trading, so they were very happy to come into the TFEX (Thailand Futures Exchange) to trade GF. This is an aspect of the industry we shall continue to push by educating the client, so that we can further expand the market. On the other hand, I think the sales team is still made up of a mixture between equities and futures. So when equities have a good year, as this year, the futures are neglected. Next year we expect to have 50,000 contracts per day in futures.
Our projections for Thai capital markets next year are the following, our target for the SET index will be at around the 1,400 to 1,450 level and this is based on the P/E ratio set at around 12x. We see the dividend to be at 3.8% to 4% and our expected corporate growth will be at around 12% to 14%.
What are the strengths and weaknesses of Thailand’s capital market regulatory framework?
KULVANICHPISIT: At the moment, we are facing the challenge of joining the AEC (ASEAN Economic Community), so the regulatory framework for Thailand must cope with the neighbouring countries’ regulations. So far, I think that the government and the regulators have started analyzing and studying what should be done to remain competitive in this new regional framework. One of the first things that the regulators should tackle is the tax issue. The government has already started to reduce taxes this year, and plans to reduce it to 20% next year. But the most challenging thing that the remains to regulate is the flow of funds coming in and out of the countries. Thailand used to have problems in 1997 and this is something that still haunts the regulators. Thus, they must be very cautious with regard to this aspect of the regulations. The state allows for funds to flow in and out more freely, but what we see is that the progress has already started and probably we will have to do a lot of revision over the rules and the regulations to be able to remain competitive in the region.
What are your future projections for Thailand’s capital markets? Which indicators are showing the most positive trends and which remain challenges?
KULVANICHPISIT: Our projections for Thai capital markets next year are the following: our target for the SET index will be at around the 1,400 to 1,450 level and this is based on the P/E ratio set at around 12x. We see the dividend to be at 3.8% to 4% and our expected corporate growth will be at around 12% to 14%. In the next 3 to 4 years, Thailand will be involved in some interesting mega projects, which will change the infrastructure of Thailand. We have already budgeted out about $70bn for projects relating to the transportation sector, such as railways and roads. We have also allocated a separate budget to manage water, as a consequence of last year floods, which badly damaged the country. These two projects will be started next year when the government pushes these investments. Probably the government will raise some infrastructure funds to support all of these projects, but what we see is that a lot of good investment is coming out and this will be a new driver for Thailand. These two projects alone, in fact, can amount to almost $100bn. Once Thailand has an infrastructure in place, the country will be much more efficient and competitive.