BANGKOK, March 20 -- Foreign funds are projected to return to Thailand's stock market after the election brings more clarity to domestic politics, says Asia Plus Securities (ASP).
As of Feb 28, foreign investors' holdings of domestic equities in the Stock Exchange of Thailand (SET) were 22.6%, a record low from an average holding of around 30%, said Pithayain Assavanig, executive director and chief financial officer at ASP. "Whatever party wins the election and becomes leader [of a coalition government], foreign investors will recognise that Thailand is a democracy. They are not interested in who forms the next government, but rather election protocols," said Mr Pithayain. "Foreign inflows are expected after the election finishes. Average daily trading value on the SET is registered at 42 billion baht, lower than last year's daily average turnover of 50 billion, said ASP. Trading value is estimated to rise for the next three quarters, with the value anticipated to be similar to that of 2018, he said.
External risks keeping a lid on investment incentives are uncertainty over the Brexit deal and the Sino-US trade disputes, said Mr Pithayain. Robo-trading transactions increased significantly in 2018, propelled by low trading commission fees of 0.03-0.04%, compared with an average commission fee of 0.09-0.10%, he said. Revenue generated from trading fees is poised to decline in the future despite an increase in the stock market's trading volume, said Mr Pithayain. ASP plans to generate revenue from investment advisory services and offer new investment products to offset a decline in trading fees. Other elements that will generate revenue for the company are asset management services, investment in startups and private equities as well as investment banking and financial advisory services. Separately, Thailand has emerged as a forerunner in developing environment, social, and governance investment (ESG) in Asean, with Thai companies having the highest share among Asean firms in the Dow Jones Sustainability Indices (DJSI).
In 2018, five SET-listed firms put Thailand among the world's industry leaders for the highest number of firms in DJSI among Asean companies for five consecutive years. The listed firms were Banpu Plc in coal and consumable fuels, IRPC Plc in oil and gas refining and marketing, PTT Plc in oil and gas, True Corporation Plc in telecommunication services and Thai Union Group Plc in food and beverages. Challenges still remain, such as the incorrect perception of ESG investment as being costly and unprofitable, or only being relevant when considering investment in a financial market, said Upalat Korwatanasakul, programme manager for research and policy analysis at the Asean-Japan Centre.