Macquarie Securities (Thailand) (MSTL) plans to launch its first derivative warrants in the Thai stock market in a bid to become one of the leaders in the local DW market.
SET president Charamporn Jotikasthira (fourth from left) shakes hands with Justin Crawford, global head of derivatives for Macquarie Securities Group, while executives look on.
DWs are similar to normal warrants in that they give investors the right but not the obligation to buy a given stock at a set price and amount.
On maturity, investors exercising their rights settle in cash rather than an actual exchange of shares.
DWs, first launched in Thailand in mid-2009, may also be listed and traded on the exchange similar to common shares or warrants.
"The company has extensive experience in participating in the DW market, and we were the first issuers of DWs in Asia-Pacific in 1996. Now is the time to capitalise on our strength in the Thai stock market," said Justin Crawford, global head of derivatives for the Macquarie Securities Group.
"The company will work with local participants to grow and develop the market, and we are positive about the outlook for DWs in Thailand," he said.
Mr Crawford said Thailand has a good base of investors well suited to DWs.
"DW trading here is relatively young, and there is a great potential to rise in the years ahead," he said.
Current trade in DWs is 300-600 million baht a day or 1-2% of total trading value, so it has a high potential for growth, said Mr Crawford.
He said DWs are traded actively in other markets in the region such as Hong Kong, South Korea and Singapore, where trading accounts for 25-30%, 20% and 5%, respectively.
Thailand's leading DW traders are Bualuang Securities and KGI Securities, while several brokers that have entered the DW market include Maybank Kim Eng, DBS Vickers, Asia Plus and Phatra Securities.
"Initially our efforts will be focused on educating Thai investors about DWs," said Noppadon Duangthipnest, MSTL's head of derivative sales in Thailand.
"We will be conducting regular educational seminars and have launched a website, called mqwarrants.co.th, with the latest tools and information, which is free for DWs investors in Thailand," he said.
Angus Kent, MSTL's managing director, said the Thai share market is still the most interesting in Asia, while the valuation of Thai shares remains low in relation to the potential for growth.
MSTL forecasts the SET index may reach 1,350 points this year, with gross domestic product (GDP) rising by 5-6% and listed firms earning throughout next year. However, the key concerns of the equity market are the financial crises in Europe and the US and the slow growth of China.
Mr Kent said if all these economies recover, then the equity in emerging markets will bloom.
But if the EU and US do not recover and China's growth declines, then this will affect emerging markets.
Mr Kent said the global crisis is crucial for Thailand, as exports will decline further and trim GDP growth.
"Whether there are cabinet reshuffles or new political parties are set up doesn't matter, as psychological effects will be short term. Thai firms have grown regardless of the political environment. They can all handle either political or financial crisis," he said.
The political unrest of 2010 provides a good example, with the stock market more than doubling by year-end despite the bloody riots, Mr Kent noted.