What to Know Before Buying Thailand Equities

Thailand is an emerging industrialized economy and the second largest economy in Southeast Asia. Like other emerging markets in the region, it has large exposure to the Chinese economy. When the Chinese stock market crashed in August on Black Monday, the Thai baht fell to a six-year low. Trade between China and Thailand was expected trade to reach $100 billion in 2015.

Thailand’s organized and regulated stock exchange is playing a growing role in regional Southeast Asian development by providing access to financing for companies and countries, such as Cambodia, Laos, Myanmar and Vietnam. Recent market reforms in Thailand and strengthening ties with China have improved fundamentals and increased long-term interest in Thai equities.

Getting Started With Investing in Thailand Shares

Popular ways to invest in Thailand are through exchange-traded funds (ETFs) and depository receipts (ADRs). ETFs are mutual funds that trade like stocks and replicate the performance of an index. SET’s most popular ETF is the iShares MSCI Thailand Capped ETF. The minimum lot size is 100 units. There are several dozen ETFs listed on SET.

Depository receipts allow investors to invest in stocks trading on foreign exchanges. Other than the Thai Fund (TTF), which trades on the NYSE, currently Thailand ADRs are over-the-counter stocks. OTC stocks are riskier investments since less information is publicly available on them and they are more thinly traded.

How the Thailand Stock Exchange Works

The Stock Exchange of Thailand (SET) lists over 600 companies representing a market capitalisation of about $13 billion Thailand Bhat. The exchange, opened in 1975, is regulated by the Securities and Exchange Commission (SEC). Stocks trade in lots of 100 units of a security. SET is an automated trading platform that integrates with other trading platforms such as the NASDAQ.

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Major Indices of SET

Two indexes track the performance of the exchange. The SET50 Index and the SET 100 Index represent the top 50 and 100 stocks in market capitalization trading on the SET, respectively. The indexes are adjusted every six months. Futures and options are traded on both indexes.

Thailand Stock Brokerages

About 10 stock brokers operate in Thailand and account for about 50% of the trading volume. The brokerage sector is dominated by long-established brokers with good financial strength, according to rating agency Fitch. Many Asian and other foreign traders invest in Thailand equities through online Asian brokers that provide access to the Thailand and other Asian stock markets.

What to Look Out for When Investing in Thailand Shares

As an emerging market, some critics have called for stricter governance of Thailand’s fast-growing public companies. Thailand is a regulated securities market. It has experienced some growing pains, however. In 2011, the chairman of the securities regulator, the SEC, resigned amid conflicts of interest concerning his role as a director of a SET-listed company.  Generally, the Thai financial system and securities regulation are considered to be sound.

Beyond individual security analysis, when analysing Thai stocks as potential investments also assess the strength of the Thai economy, and whether foreign investors are net buyers or sellers of Thai equities. Thai stocks, as well as other stock exchanges in the Southeast Asian region, are sensitive to China’s stock market.

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C.E.O @ The New Savvy
Anna Haotanto is passionate about finance, education, women empowerment and children’s issues. Anna has been featured in CNBC, Forbes, The Straits Times, Business Insider, INC and The Peak Singapore. She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen). Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).