Thai stock market looking to become regional leader
The Securities and Exchange Commission (SEC) has floated the idea of heavily promoting the Thai capital market as a gateway for foreign and local investment in the bourses of what is termed the Greater Mekong Subregion (GMS). If this idea gains traction it would help Thailand strengthen its overall competitiveness within Asean.
The Stock Exchange of Thailand (SET) has a market capitalization of around 14.7 trillion baht which is dwarfed by most other major global stock markets as well as Singapore, its closest regional competitor.
By taking up the lead in the GMS, an area which encompasses Cambodia, Laos, Vietnam, Myanmar, and China’s southern Yunnan province, the Thailand stock exchange could become very much more attractive to foreign investors, especially those looking to take advantage of the potential fast growth expected in these economies over coming years.
Given that Myanmar is only expected to open its stock exchange some time in 2015 and the bourses of the other GMS economies are relatively small and will take some time to increase their trading value, Thailand’s position as being much further advanced could make the SET the perfect bridge for global investors looking for strong growth over the next decade or so.
In recent times rules governing the foreign company listings on the Thai bond and stock markets have been relaxed. The SET management also recognize Thailand needs to further develop its local capital market to be a source of funding for corporations to expand as well as helping to lower the risk from relying on loans from financial institutions.
Those in charge of the SET recognize the need to develop a capital market that can see consistent growth that will attract further investment, and this, in turn, will help to fuel economic growth over the longer term.
The SET also realizes it needs to play a more active role in the region, otherwise as the other bourses begin to gain market share and strength, Thailand could be left behind.
If the SET can place itself in the position of being a substitute or proxy for the Greater Mekong Subregion markets then foreign investors should be confident of becoming involved in the Asean region as whole, and Thailand can play a leading role.
Among the elements preventing much greater foreign investment into the GMS are the uncertainty of rules and regulations designed to protect those investments. The stock exchanges of the GMS countries all need to improve their accounting levels and especially raise their corporate governance to meet international standards.
If the SET plan comes to fruition, then Thailand’s already strong financial market position will be enhanced even further.