SET plans to eclipse Singapore
The Stock Exchange of Thailand seeks to increase market capitalisation to US$700 billion in the next three years from $500 billion now to overtake the Singaporean bourse as Southeast Asia's largest market, says SET president Charamporn Jotikasthira.
The SET's market capitalisation is similar to the Malaysian stock exchange but smaller than Singapore and Taiwan's, each of which is closer to $700 billion.Despite the smaller market capitalisation, the SET has passed its Singaporean counterpart for highest average trading volume in Asean at 50-60 billion baht, about 35% higher than Singapore.
Mr Charamporn said the local stock market has an edge over its regional peers in terms of listed companies' earnings growth, geographical location and political stability, which have attracted investment in recent years.
To achieve its ambitious target, the SET must raise its supply side to keep up with the fast-growing demand side.
"Increasing the supply side is not easy as the SET cannot convince large state enterprises to list on the market. But there is a chance some of the 2 trillion baht worth of infrastructure projects may raise funds through the stock market," he said.
Small and medium-sized enterprises are also lining up to list as a favourable market offers premium prices, which could boost the local bourse's capitalisation.
Prapas Tonpibulsak, the chief investment officer of Krungsri Asset Management, predicts the Monetary Policy Committee will cut the policy interest rate by 25 basis points but warned that a rate reduction alone is not enough to curb the baht's gains.
"Any rate cut will not be that big, as it will affect financial stability. Other Finance Ministry measures should be implemented to manage the baht efficiently and tame capital inflows," he said.
The measures comprise banning foreigners from buying the central bank's bonds, setting a minimum period for foreigners to hold government and state enterprise bonds, imposing fees on capital inflow profits in the bond market and compulsory hedging to discourage foreign investors from taking advantage of exchange rate movements.
Since 2000, the baht has gained 30% against the US dollar, tops in the region, followed by the Singaporean dollar at 27%, ringgit at 20% and Philippine peso at 17%. The rupiah has lost 1% during the period.
Thiti Tantikulanan, the executive chairman of Kasikorn Securities, said it has a bullish outlook on the baht, but this may change if China's economy slows down.
China announced a disappointing flash Purchasing Managers' Index (PMI) last week, a sign the world's second-largest economy is stuttering.
"If China's PMI issues bad figures two or three times in a row or the US exits its loose monetary policy, then foreign money could flee the region to the US, whose economy is staging a recovery," said Mr Thiti
But barring unexpected factors, Mr Prapas said the Thai equity market would not be affected by the stronger baht.
"Thailand's equities market has a positive response if the baht is strong, but a weaker baht could take a toll, in contrast to the US and Japanese stock markets."
Mr Prapas said this is because the energy sector, which has the largest market cap, and utilities sector respond positively when the baht is strong.
The electronics sector is hurt, but it accounts for only 14% of exports, down from 20%.