Depositary receipts (DRs) are expected to be increasingly popular with Thai investors in 2024 because they facilitate investment in well-known foreign stocks, allowing portfolio diversification and substantial returns, say executives.
DRs have steadily grown on the Thai bourse, with roughly 16 billion baht worth held by investors on the Stock Exchange of Thailand (SET) as of last month, said Rinjai Chakornpipat, the SET's senior executive vice-president and head of market division.
The number has increased every month and the trend is expected to continue this year as many more investors are interested in new DRs, she said.
Recently emerging as an option for investing in foreign securities, DRs allow investors to invest in stocks directly via the Thai stock market.
DR issuers purchase foreign shares and sell them to Thai investors as DRs.
DRs allow investors to invest in foreign stocks without having to transfer money to buy abroad, avoiding foreign currency exchange.
Investors can own foreign stocks such as Microsoft, Apple, Alphabet and Tesla through DRs.
Investment in foreign securities traditionally involved a Thai or foreign securities company sending a trading order to a foreign stock exchange, which was traded in a foreign currency.
Another option is a foreign investment fund, in which the fund manager chooses funds that fit the desired securities investment policy.
State-owned Krungthai Bank (KTB), which is a DR issuer authorised by the Securities and Exchange Commission (SEC), has issued DRs of Microsoft, Apple and Alphabet.
KTB also issued DRs for large companies from China, such as Alibaba and BYD.
Investors can choose from more than 20 DRs.
According to KTB, DRs are a good choice for investors to diversify risk across many countries. Last year, many US stocks produced high returns.
"If you invest in US companies through DRs, it can improve your portfolio return a lot, compared with concentrating on Thai stocks only," said a source at KTB who requested anonymity.
Next year, KTB plans to issue many more DRs from various stock markets around the world, with some of them undergoing due diligence now to select good stocks for investors, said the source.
The bank filed a list of proposed DRs to the SEC, including US stocks such as Netflix, Starbucks, Meta, Amazon and Booking.com, as well as Singaporean offering Singtel.
More choices are expected to be offered to investors next year, said the source.