What is the breakdown between foreign and domestic exposure on the SET?
JOTIKASTHIRA: Among the leading listed firms, for example the Siam Cement Group, Thai Union Frozen Food, or PTT, they have been investing abroad all along. The trend has been expanding and diversifying so as to become a more global company. I think this is a natural trend because these companies have been excellently managed companies and in the past few years they have diversified their markets especially in the export sector. Their export in 2005 to the 3 regions, the US, Europe, and Japan, contributed 20% each. Today, these regions only make up 10% each of exports. The rest have been expanding all over the world and this is also true from their production base point of view. Therefore, based on their ability to manage international operations, we have seen a lot more companies expanding abroad. The Thai economy is growing at 4% to 5%, while other growth will come from the rest of the world, especially around this region in ASEAN. In our more direct neighbors, which we call LCMV, Laos, Cambodia, Myanmar, and Vietnam, the growth is almost double digit in the next 5 years. Being in the center of such a high growth region, I think this is a very good trend for Thai listed firms.
How would you describe listing diversification on the SET?
JOTIKASTHIRA: If you look at the SET 50 without banking and energy, you will see that it is quite well diversified. There are about 6 large sectors both on the market cap side and on the profit side. So I believe the diversification is not too bad. Also in the future there will be some more products and issues from new types of investment that we just launched last year. First, we have amended the listing rules for holding companies. The rules will allow the SET to be the venue to raise capital for operations in Laos, Cambodia, Myanmar, and Vietnam, whereby if you have a subsidiary operation in those countries, you can use the SET to raise capital for them. Secondly are the Infrastructure Funds; we have a lot of infrastructure that actually has been earning cash flow regularly. At the same time, many of the State enterprises will be needing capital for investment. Therefore, this is one way to use the existing infrastructure to raise funds using an infrastructure fund. The third initiative is the REITs. This has already been launched and in the next year there should be more activity in REITs because, as you know, REITs have been quite popular in Southeast Asia. It’s quite exciting. There are a few big projects coming up. On holding companies, there are companies like CK Power, which was announced last year. This is a power company operating in Laos, but it will be raising funds through the SET. This should be one of the first large exciting new issues.
How will the ASEAN Economic Community (AEC) integration impact regional capital markets?
JOTIKASTHIRA: On the capital markets side we did not wait. Last year we established ASEAN linkages with Thailand, Singapore, and Malaysia. As a result, there is another highway whereby the local brokers have facilities to provide service to their clients looking to invest in the stocks in other countries. If you look at the entire set of ASEAN exchanges, there are 7 exchanges in 6 countries, and about 3,500 stocks traded, and a market cap of about $2tn, and an economy of about 590m people. This is one of the fastest growing economies in the world. So I believe by 2015, hopefully all of the other exchanges will link together and will form a fairly large region with more integrated capital markets.
What needs to be done to attract more institutional investment to the SET?
JOTIKASTHIRA: First of all, the technology side needs to be state of the art, which we've done. So towards the end of last year we assured that everything was stabilized and now this year we are ready to start launching new facilities such as co-location and high frequency trading. Secondly, it is the ability to communicate the strengths of the Thai listed firms, which is basically the resiliency of Thai listed firms and the opportunity of the SET or Thailand. We happen to be geographically right in the middle of the fastest growing countries in the world with Laos, Cambodia, Myanmar, Vietnam, and ASEAN. Therefore, there are a lot of projects in communication, high-speed rail, and there is going to be a lot of trade between these fast growing countries. Basically a lot of these transactions will be going through us. The strong listed companies on the SET should be able to take these opportunities on because the economies growing around us normally consume similar products as those produced in Thailand. Therefore, there should be markets for our companies to expand abroad. So that will be the story for the next 5 to 10 years. Therefore, if the existing listed firms can take up that opportunity, I am quite sure this will be a very attractive growth story for companies in the SET.
We have amended the listing rules for holding companies. The rules will allow the SET to be the venue to raise capital for operations in Laos, Cambodia, Myanmar, and Vietnam, whereby if you have a subsidiary operation in those countries, you can use the SET to raise capital for them.