Tata Consultancy Services, the leading IT services, business solutions and outsourcing firm today announced that the Reminbi currency trading platform for the Chinese inter-bank market, an initiative of China Foreign Exchange Trade System (CFETS), a subsidiary of People’s Bank of China (PBoC) has successfully gone live nationwide. The New Generation CNY Trading System (NGCNYTS) is a forward-looking trading system, which aims to incorporate the future vision of the Chinese Interbank market and relevant international best practices. It is designed to meet the fast growing requirements of the Chinese financial market with efficient risk management and real time monitoring systems. It supports multiple trading methods, including special features for market makers.
NGCNYTS is a next generation system providing unified platform across Debt, Money and Derivative Markets. NGCNYTS gained national importance, as it is the primary trading platform for all financial institutions such as Commercial Banks, Pension, Trust & Mutual Fund, Securities firms and Insurance companies in China.
Speaking on the successful implementation of this landmark project, Girija Pande, Executive Vice President and Head, TCS Asia Pacific, said, “We are extremely pleased to successfully deliver the CFETS project built based on our experience in other global markets and in close cooperation with CFETS who have experience in Chinese domestic market. It also provides flexibility to connect with third party front ends and other external interfaces. Deploying in ten markets at a time is a unique challenge which TCS could complete successfully.”
“The project is among the most prestigious venture of TCS in the APAC region, involving a highly dedicated multi-cultural team of over 130 associates spanning a period of more than 2 years. The team will be maintaining the system going forward and enhancing the system for additional markets,” he further added.
TCS’ trading solution at CFETS is scalable and can handle rapid growth in volumes with ease. Due to its scalable and configurable architecture, it also simplifies the addition of multiple financial products thus reducing the overall time to market.
Besides CFETS, TCS has successfully delivered the mission critical trading systems for the National Stock Exchange of India Limited, India, National Commodity and Derivatives Exchange, India and Clearing Corporation of India Limited (CCIL). TCS is also the chosen strategic partner involved in maintaining the trading applications at Deutsche Boerse AG, Germany.
TCS pioneered the entry of Indian IT industry in China in 2002 and remains at the forefront of that thrust with 1100 consultants in China and four Global delivery Centres (Beijing, Shanghai, Tianjin& Hangzhou). In 2005, TCS was invited by Chinese Government to form a Joint Venture to create a large scale global sourcing base in China. TCS China is serving over 30 Global and domestic clients like Eaton, Motorola, Cummins, China Foreign Exchange Trade System (CFETS), Guangdong Provincial Rural Credit Cooperative Union (GDRCC), China Trust Bank, Hua Xia Bank.
Wednesday, December 16, 2009
Thursday, December 3, 2009
Thai bourse announces its four strategies for 2010
The Stock Exchange of Thailand (SET) announced its four main strategies to strengthen the Thai exchange both in its quality and transaction volume to be a strong foundation for the Thai capital market and the nation’s long-term economic growth. These strategies are: 1) Enhancing the market quality and integrity; 2) Increasing liquidity; 3) Building foundation for future development and 4) Continue preparing for SET’s demutualization.
“SET Board of Governors approved SET’s next year plan, which follows its five year-strategic framework. In addition to following the four strategies, SET will continue to operate projects for the long-term development of the Thai capital market through the Capital Market Development Fund (CMDF),” revealed SET President, Patareeya Benjapolchai.
“SET will uplift the integrity of the Thai capital market by screening listed companies for transparency in management and disclosure, including implementing proactive measure in market surveillance and listing and disclosure by improving governance assessment measures, increasing transparency and build confidence of investors”
For transaction volume, SET aims at increasing market capitalization by THB100 billion from new listings. In addition, SET plans to launch new products, including THB10 gold futures in Q1/2010, interest rate futures in Q4/2010, and four more exchange-traded funds (ETFs), to increase investment opportunities and be risk management tools for investors,” said Ms. Patareeya. “Moreover, SET will increase the securities holding proportion of local institutional investors to 12-15% (As of June 2009, it was at 9.85%) of total market capitalization, to increase the Thai capital market’s stability. SET plans to have a daily average trading value at THB17.5-22.0 billion of total market capitalization and a daily average trading volume of SET50 Index Futures at 10,000-12,000 contracts,”
“SET will focus on increasing the number of listed companies with good management quality, transparency in disclosure and compliance with corporate governance principles. SET will encourage large companies or the subsidiaries of state enterprises to list, including prepare the readiness of capital market professionals, e.g., auditors or financial advisors, to support the disclosure-based listing starting in 2011, which aims at supporting medium and small-sized companies having growth potential and wanting to raise funds. Moreover, SET will promote the attraction of medium-sized companies in the eyes of investors and amend rules and regulations that obstruct listed companies’ fundraising processes,” disclosed SET Chief Marketing Officer, Issuer & Listing, Vichate Tantiwanich on the strategy to enhance the market quality and integrity.
“Aside from launching new products and increasing liquidity to the existing ones, SET will increase liquidity to medium-sized securities whose firms have had sustained impressive performance, increase the securities holding proportion of institutional investors, and increase transaction volume of institutional investors in the derivatives market. To reach its objectives, SET will develop channels and adjust its rules and regulations to facilitate institutional investors’ access, including encouraging Bank of Thailand to permit placing foreign currency as collateral to reduce cost and exchange rate risks, and increase flexibility for foreign institutional investors,” revealed Chief Marketing Officer, Markets & Post-trade Services, Sopawadee Lertmanaschai on the strategy to increase liquidity.
“The major plan in developing IT Master Plan, which will be accomplished in 2009, aims at enhancing the information technology of the securities industry to be able to increase business competitiveness and cross-border trading between the regional exchanges and other exchanges in other regions in the future. Through the ASEAN Linkage project in 2010, SET will work with its alliance exchanges intensively to develop systems supporting cross-border trading in Q1/2011. SET will be one of ASEAN exchanges to trade securities between exchanges through the ASEAN Linkage project; this will be the first such phenomenon in this region,” said SET Chief Operating Officer Nongram Wongwanich about the strategy to build foundation for future development.
Moreover, SET will increase cooperation with countries in Indochina in providing joint services, or dual listings, including revising rules to facilitate foreign companies which list on SET as their primary listing to be the gateway to Indochina as planned in the five-year strategies framework.
“In 2010, we will work on approval of laws on SET’s demutualization, together with building accurate understandings about the roles and SET’s demutualization to target groups and the general public. Besides, SET will work with the Securities and Exchange Commission (SEC) to define and delineate each other’s roles, and the governance structure after the demutualization to prevent conflict of interest,” revealed Chief Strategy Officer & Executive Director, Capital Market Research Institute, Veerathai Santiprabhob, PhD, about the preparations for SET’s demutualization, which is one of the eight measures of the Thai Capital Market Development Plan.
“At the same time, SET will be responsible for long-term capital market development to support the four strategies. This will be done through CMDF, which was established by SET to disseminate knowledge on investment and promote corporate governance and corporate social responsibility in the capital market, including supporting capital market-related research and build networks between academics and professionals in the capital market,” continued Ms. Patareeya.
“SET will promote corporate governance principles among listed companies, focusing on listed companies with prices lower than their book values, and encourage medium-sized companies to apply investor relations guidelines into action to create deeper understanding of firms among shareholders and investors,” Executive Director, Industry Development Center, Chaiyoot Chamnanlertkit.
“SET will work with commercial banks and the Thai Financial Planner Association in reaching out to savers, expanding the investor base by disseminating investment knowledge to bank customers through the campaign Wealth Manager @ Bank and Wealth Customer @ Bank. Currently, there are about 1.7 million bank accounts with the potential to invest. Besides, SET will organize the Modern Marketing campaign to enhance marketing officers’ quality to be able to give integrated advice on investment products and cooperate with Association of Securities Companies in promoting securities companies to develop their marketing officers’ skills in both quality and quantity,” SET Executive Director, Market Education Center, Punsak Vejanurug revealed.
“2010 will be a year of establishing a strong foundation to support a big change of the Thai capital market according to the Thai Capital Market Development Plan, both the demutualization of SET and the impending liberalization. SET strategies in 2010, therefore, focus on the operations that are in accordance with and support the Thai Capital Market Development Plan, in developing both quality and transaction volume, giving importance to responding to customers’ needs, e.g., listed companies, investors, and intermediaries, increasing SET effectiveness and business competitiveness and getting ready for demutualization to be a public company limited in 2011. These actions will make the Thai capital market an important mechanism driving the nation’s long-term economic growth,” concluded Ms. Patareeya.
“SET Board of Governors approved SET’s next year plan, which follows its five year-strategic framework. In addition to following the four strategies, SET will continue to operate projects for the long-term development of the Thai capital market through the Capital Market Development Fund (CMDF),” revealed SET President, Patareeya Benjapolchai.
“SET will uplift the integrity of the Thai capital market by screening listed companies for transparency in management and disclosure, including implementing proactive measure in market surveillance and listing and disclosure by improving governance assessment measures, increasing transparency and build confidence of investors”
For transaction volume, SET aims at increasing market capitalization by THB100 billion from new listings. In addition, SET plans to launch new products, including THB10 gold futures in Q1/2010, interest rate futures in Q4/2010, and four more exchange-traded funds (ETFs), to increase investment opportunities and be risk management tools for investors,” said Ms. Patareeya. “Moreover, SET will increase the securities holding proportion of local institutional investors to 12-15% (As of June 2009, it was at 9.85%) of total market capitalization, to increase the Thai capital market’s stability. SET plans to have a daily average trading value at THB17.5-22.0 billion of total market capitalization and a daily average trading volume of SET50 Index Futures at 10,000-12,000 contracts,”
“SET will focus on increasing the number of listed companies with good management quality, transparency in disclosure and compliance with corporate governance principles. SET will encourage large companies or the subsidiaries of state enterprises to list, including prepare the readiness of capital market professionals, e.g., auditors or financial advisors, to support the disclosure-based listing starting in 2011, which aims at supporting medium and small-sized companies having growth potential and wanting to raise funds. Moreover, SET will promote the attraction of medium-sized companies in the eyes of investors and amend rules and regulations that obstruct listed companies’ fundraising processes,” disclosed SET Chief Marketing Officer, Issuer & Listing, Vichate Tantiwanich on the strategy to enhance the market quality and integrity.
“Aside from launching new products and increasing liquidity to the existing ones, SET will increase liquidity to medium-sized securities whose firms have had sustained impressive performance, increase the securities holding proportion of institutional investors, and increase transaction volume of institutional investors in the derivatives market. To reach its objectives, SET will develop channels and adjust its rules and regulations to facilitate institutional investors’ access, including encouraging Bank of Thailand to permit placing foreign currency as collateral to reduce cost and exchange rate risks, and increase flexibility for foreign institutional investors,” revealed Chief Marketing Officer, Markets & Post-trade Services, Sopawadee Lertmanaschai on the strategy to increase liquidity.
“The major plan in developing IT Master Plan, which will be accomplished in 2009, aims at enhancing the information technology of the securities industry to be able to increase business competitiveness and cross-border trading between the regional exchanges and other exchanges in other regions in the future. Through the ASEAN Linkage project in 2010, SET will work with its alliance exchanges intensively to develop systems supporting cross-border trading in Q1/2011. SET will be one of ASEAN exchanges to trade securities between exchanges through the ASEAN Linkage project; this will be the first such phenomenon in this region,” said SET Chief Operating Officer Nongram Wongwanich about the strategy to build foundation for future development.
Moreover, SET will increase cooperation with countries in Indochina in providing joint services, or dual listings, including revising rules to facilitate foreign companies which list on SET as their primary listing to be the gateway to Indochina as planned in the five-year strategies framework.
“In 2010, we will work on approval of laws on SET’s demutualization, together with building accurate understandings about the roles and SET’s demutualization to target groups and the general public. Besides, SET will work with the Securities and Exchange Commission (SEC) to define and delineate each other’s roles, and the governance structure after the demutualization to prevent conflict of interest,” revealed Chief Strategy Officer & Executive Director, Capital Market Research Institute, Veerathai Santiprabhob, PhD, about the preparations for SET’s demutualization, which is one of the eight measures of the Thai Capital Market Development Plan.
“At the same time, SET will be responsible for long-term capital market development to support the four strategies. This will be done through CMDF, which was established by SET to disseminate knowledge on investment and promote corporate governance and corporate social responsibility in the capital market, including supporting capital market-related research and build networks between academics and professionals in the capital market,” continued Ms. Patareeya.
“SET will promote corporate governance principles among listed companies, focusing on listed companies with prices lower than their book values, and encourage medium-sized companies to apply investor relations guidelines into action to create deeper understanding of firms among shareholders and investors,” Executive Director, Industry Development Center, Chaiyoot Chamnanlertkit.
“SET will work with commercial banks and the Thai Financial Planner Association in reaching out to savers, expanding the investor base by disseminating investment knowledge to bank customers through the campaign Wealth Manager @ Bank and Wealth Customer @ Bank. Currently, there are about 1.7 million bank accounts with the potential to invest. Besides, SET will organize the Modern Marketing campaign to enhance marketing officers’ quality to be able to give integrated advice on investment products and cooperate with Association of Securities Companies in promoting securities companies to develop their marketing officers’ skills in both quality and quantity,” SET Executive Director, Market Education Center, Punsak Vejanurug revealed.
“2010 will be a year of establishing a strong foundation to support a big change of the Thai capital market according to the Thai Capital Market Development Plan, both the demutualization of SET and the impending liberalization. SET strategies in 2010, therefore, focus on the operations that are in accordance with and support the Thai Capital Market Development Plan, in developing both quality and transaction volume, giving importance to responding to customers’ needs, e.g., listed companies, investors, and intermediaries, increasing SET effectiveness and business competitiveness and getting ready for demutualization to be a public company limited in 2011. These actions will make the Thai capital market an important mechanism driving the nation’s long-term economic growth,” concluded Ms. Patareeya.
LCH.Clearnet’s OTC SwapClear service clears one millionth trade
SwapClear, LCH.Clearnet Limited’s (LCH.Clearnet) market leading OTC interest rate swap clearing service, has cleared its millionth trade, taking the notional value of trades in SwapClear to US$206 trillion.
Launched in 1999, SwapClear currently clears 64% of the global interbank interest rate swap market and the range of products cleared has been extended to include overnight index swaps of up to two years in four currencies and interest rate swaps in tenors of up to 30 years in up to 14 currencies.
Joe Reilly, Director, SwapClear, LCH.Clearnet said; “SwapClear’s continued success demonstrates the market demand for effective and robust clearing services for vanilla OTC products. For 10 years, SwapClear has successfully mitigated risk and provided operational efficiencies in the OTC interest rate swap market.”
The resilience of SwapClear’s default management process was demonstrated in September 2008 when it successfully handled Lehman’s $9 trillion interest rate swap default. The highly effective default management process ensured that 66,390 trades were hedged and auctioned off to other clearing members in a timely fashion and that the default was managed well within the margin held and with no recourse to the default fund.
Further developments are planned for SwapClear, including extensions to tenors to up to 50 years in some of the 14 currencies currently cleared and a service tailored for the buy-side.
LCH.Clearnet Limited is both a Financial Services Authority (FSA) Recognised Clearing House and a Commodity Futures Trading Commission (CFTC) registered Derivatives Clearing Organization (DCO).
Launched in 1999, SwapClear currently clears 64% of the global interbank interest rate swap market and the range of products cleared has been extended to include overnight index swaps of up to two years in four currencies and interest rate swaps in tenors of up to 30 years in up to 14 currencies.
Joe Reilly, Director, SwapClear, LCH.Clearnet said; “SwapClear’s continued success demonstrates the market demand for effective and robust clearing services for vanilla OTC products. For 10 years, SwapClear has successfully mitigated risk and provided operational efficiencies in the OTC interest rate swap market.”
The resilience of SwapClear’s default management process was demonstrated in September 2008 when it successfully handled Lehman’s $9 trillion interest rate swap default. The highly effective default management process ensured that 66,390 trades were hedged and auctioned off to other clearing members in a timely fashion and that the default was managed well within the margin held and with no recourse to the default fund.
Further developments are planned for SwapClear, including extensions to tenors to up to 50 years in some of the 14 currencies currently cleared and a service tailored for the buy-side.
LCH.Clearnet Limited is both a Financial Services Authority (FSA) Recognised Clearing House and a Commodity Futures Trading Commission (CFTC) registered Derivatives Clearing Organization (DCO).
Foreign investors continued to be net buyers of Thai stocks
Offshore interest in investing in the Thai capital market continued to expand, as foreign investors have now been net buyers for the eight consecutive months through October 2009. At the same time, daily average trading value continued to rise, reaching a 27-month high. Locally, the number of active trading accounts and trading value per account consistently rose. Nevertheless, worries over the global economic recovery as well as negative rumors in the domestic market led to a drop in The Stock Exchange of Thailand (SET) Index and market capitalization.
Meanwhile, daily average trading volume of every product in Thailand Futures Exchange PCL (TFEX) increased, particularly in gold futures, which made a new high for the second consecutive month since it started trading. This rise resulted from investors’ interest in the global gold prices, which continued to increase.
Operating performance of the Banking Sector in Q3/2009 improved, both for the year-on-year and quarter-to-quarter comparison basis. In particular, its net profits rose, while the non-performing loans (NPL) decreased.
Regarding the liberalization of commission fee for stock trading using sliding scale in 2010 and the enforcement of the full liberalization in 2012, the favorable environment and improved structure of Thai securities business today should help them be better prepared for the adjustment, compared to the previous liberalization attempted in 2000. This is due to the increased financial strength of the securities industry, the growth in trading value, the rise in number of trading accounts, the increased variety and diversification of sources of income, and new services and products to meet investors’ needs in every market environment.
1. Performance Overview: Thai vs. regional exchanges
The Stock Exchange of Thailand (SET) Index as of end-October 2009 decreased by 4.44% from end-September 2009, due to investors’ worries over the global economic recovery combined with negative rumor in the domestic market. The decrease in SET Index resulted in a drop in forward P/E ratio to 11.9 times as of October 30, 2009, which remained among the lowest in the region. Meanwhile, the market dividend yield was at 3.68%, the highest in the region.
2. Summary of Thai capital market performance
In October 2009, the Thai capital market was affected by negative rumor during October 14-15, which resulted in the month’s lowest SET Index at 670.72 on October 15, before rebounding after the news had been clarified. However, at the end of October, SET Index decreased again, in line with other regional exchanges’ indices. As of end-October 2009, SET Index closed at 685.24, down 4.44% from the previous month. On the other hand, the mai Index closed at 209.93, or 4.43% rise from the previous month.
As of October 2009, the total market capitalization of SET and mai was at THB5.5 trillion (approx. USD165.34 billion), a 4.28% drop from end-September 2009, mainly as a result of a decrease in SET Index.
As of October 2009, the number of securities having a price to book value ratio (P/BV) of less than one decreased slightly from 277 securities (as of September) to 275, equivalent to 53.29% of all 516 common stocks.
3. Trading activity
In October 2009, average daily trading value reached its highest level in 27 months. SET and Market for Alternative Investment (mai)’s combined average daily trading value reached THB27.01 billion (approx. USD810.56 million), the highest level in 27 months, or since July 2007, when the daily average trading value stood at THB32.18 billion (approx. USD965.77 million). In October 2009, the total trading value was THB567.33 billion (approx. USD17.02 billion).
Moreover, retail investors were more active than any other investor groups, accounting for 63% of total trading value. Local institutional investors and the securities companies’ proprietary trading held net sell positions, while retail and foreign investors held net buy positions. Foreign investors have had a net buy position for eight consecutive months. During January – October, 2009, foreign investors had a net buy position of THB55.72 billion (approx. USD1.67 billion), compared to a net sell position of THB162.35 billion (approx. USD4.87 billion) for the whole 2008.
Trading value by industry showed that the share of trading value in the Energy Sector stocks has decreased, while that of the Banking Sector has increased. The share of trading value in Energy Sector stocks has decreased to 27% from 32% in previous month. On the other hand, the share of trading value in Banking Sector stocks has increased to 24%, after dropping during the past two months. Stocks in the Other Industry Sectors which enjoyed an increase in trading value share were the Agribusiness Sector, up to 4.3% in October vs. a 1.3% in the previous month. Meanwhile, the share of trading value categorized by market capitalization of the stocks was close to that of the previous month. The share of trading value for securities in SET10 group slightly increased to 36%, from 34% in the previous month.
4. Active trading accounts
There were 143,108 active trading accounts as of end-September 2009, a rise of 39% over the same period of last year. The ratio of active accounts to total trading accounts in October rose to 25.8% from the 23.2% of the previous month. The average trading value of THB3.94 million per account in October was an increase of 61% over September 2008.
The number of active internet trading accounts in October 2009 rose 5% over September 2009. Meanwhile, the value of internet trading increased by 118%, compared to that of October 2008, but decreased by 4% decrease compared to that of September 2009. Internet trading value in October 2009 was at THB123.68 million (approx. USD3.71 billion), equivalent to 21.8% of total trading value, a slight decrease from 22.5% in the previous month.
5. Overview of the derivatives market
Gold futures’ trading volume has increased continually and reached a historic high since the start of trading. In October 2009, TFEX’s daily average trading volume was 16,012 contracts, a 22% increase from previous month, due to price fluctuations of the underlying product. Trading volume has increased for every derivative product. The product with the highest trading volume compared to that of the previous month was single stock futures, with an 85% increase, followed by gold futures, up 64%. Gold futures recorded the highest daily average trading volume (new high) for the second consecutive month since the start of trading in February 2009, due to heightened investors’ interest driven by rising gold prices.
6. Overview of the funds raised
In October 2009, listed companies raised total funds of THB2.85 billion (approx. USD85.54 billion) from the capital market, consisting of the funds raised via IPOs of THB248 million (approx. USD7.44 million) by Kiattana Transport PCL (KIAT) and Moong Pattana International PCL (MOONG). Meanwhile, THB2.60 billion (approx. USD78.10 million) was raised through seasonal equity offerings (SEOs). Among the key fund raising activities via SEO were Thai Vegetable Oil PCL (TVO) and PTT PCL’s group at THB845 million (approx. USD25.35 million) and THB582 million (approx. USD17.46 million), respectively.
Special Topic
1. Report on the Banking Sector’s operating performance for Q3/2009
In Q3/2009, the Banking Sector’s operating performance improved, when compared to the same period last year as well as the previous quarter. The net profits stood at THB24.99 billion (approx. USD749.74 million) in Q3/2009, an increase of 12.8% over Q2/2009, or an increase of 5.6% over the same period last year. This is due to rises in revenue from loan fees for retail customers and decreases in loan loss provision. Moreover, banks could maintain the quality of their assets, as demonstrating by the Non-performing loans of 5.7%, a decrease from 5.74% in Q2/2009 and from 6.46% in Q3/2008.
2. Liberalization of stock trading commissions
Given improved environment and industry structure, Thailand’s securities business is better prepared for the upcoming liberalization of stock trading commissions, which will be enforced on a sliding scale basis in 2010, following with the full liberalization in 2012. The industry should be better prepared to cope with challenges from the liberalization than during the previous liberalization in 2000 because of the following reasons:
1. Overall, securities firms have greater financial strength than in 2000: During 2005- Sept. 2009 (excluding the year 2008, when SET was affected by the economic crisis), the securities companies’ average net profit ratio was 20%. Moreover, total shareholder’s equity of all securities firms as of September 2009 reached THB57.13 billion (approx. USD1.71 billion), doubled that of the year 2000.
2. The number of active accounts and average trading value has soared. The number of active accounts per month (monthly average over 9M/2009) was at 102,652 accounts, more than two times of the figure in 2000, which were only 48,432 accounts. Meanwhile, daily average trading value during 2005 – October 2009 was at THB15.87 billion, roughly three times of the figure of THB4.9 billion during 1999-2000 (before the previous liberalization). Moreover, Internet trading, which provides lower commissions compared to other traditional channels, soared, accounting for 21% of total trading value (average rate of 9M/2009), compared to the very low rate in 2000 of less than 0.1% .
3. Securities companies’ variety and diversified sources of income
Income from proprietary trading For the past several years, securities companies have gradually emphasized generating income from proprietary trading, reflected in the increasing proportion of proprietary trading. As of October 2009, proprietary trading accounted for 12% of total trading value, compared only 1% of total trading value during 1999-2000.
Income generated from more financial products In 2006, TFEX launched its first derivatives products, SET50 Index Futures, followed by SET50 Index Option, Single Stock Futures and Gold Futures. Moreover, TFEX plans to launch two more products, mini-gold futures and interest rate futures in 2010. Increased variety of financial products would enable the Thai capital market to respond to investors needs in every market circumstance.
Income generated from a wider variety of services At present, securities companies can generate income form providing various new services including sales representative services for mutual funds and bonds, securities borrowing and lending (SBL), foreign stock trading as well as structured note issuance.
4. Finding alliances to strengthen business competitiveness. Over the years, regulators have relaxed the rules to enable securities companies to flexibly merge their businesses. In 2009, five securities firms merged in part as a preparation for the liberalization in 2012, namely, 1) KTB Securities Co., Ltd. and Seamico Securities Co., Ltd. joined to become KT Zimico Securities Co., Ltd., and 2) Finansa Securities Co., Ltd., Syrus Securities Co., Ltd. and ACL Securities Co., Ltd., combined to become Finansia Syrus Co., Ltd.
For above reasons, securities companies are expected to be able to adjust more efficiently to the challenges from the upcoming liberalization. This should result in greater competition and efficiency as well as high quality services that better respond to investors’ needs.
Meanwhile, daily average trading volume of every product in Thailand Futures Exchange PCL (TFEX) increased, particularly in gold futures, which made a new high for the second consecutive month since it started trading. This rise resulted from investors’ interest in the global gold prices, which continued to increase.
Operating performance of the Banking Sector in Q3/2009 improved, both for the year-on-year and quarter-to-quarter comparison basis. In particular, its net profits rose, while the non-performing loans (NPL) decreased.
Regarding the liberalization of commission fee for stock trading using sliding scale in 2010 and the enforcement of the full liberalization in 2012, the favorable environment and improved structure of Thai securities business today should help them be better prepared for the adjustment, compared to the previous liberalization attempted in 2000. This is due to the increased financial strength of the securities industry, the growth in trading value, the rise in number of trading accounts, the increased variety and diversification of sources of income, and new services and products to meet investors’ needs in every market environment.
1. Performance Overview: Thai vs. regional exchanges
The Stock Exchange of Thailand (SET) Index as of end-October 2009 decreased by 4.44% from end-September 2009, due to investors’ worries over the global economic recovery combined with negative rumor in the domestic market. The decrease in SET Index resulted in a drop in forward P/E ratio to 11.9 times as of October 30, 2009, which remained among the lowest in the region. Meanwhile, the market dividend yield was at 3.68%, the highest in the region.
2. Summary of Thai capital market performance
In October 2009, the Thai capital market was affected by negative rumor during October 14-15, which resulted in the month’s lowest SET Index at 670.72 on October 15, before rebounding after the news had been clarified. However, at the end of October, SET Index decreased again, in line with other regional exchanges’ indices. As of end-October 2009, SET Index closed at 685.24, down 4.44% from the previous month. On the other hand, the mai Index closed at 209.93, or 4.43% rise from the previous month.
As of October 2009, the total market capitalization of SET and mai was at THB5.5 trillion (approx. USD165.34 billion), a 4.28% drop from end-September 2009, mainly as a result of a decrease in SET Index.
As of October 2009, the number of securities having a price to book value ratio (P/BV) of less than one decreased slightly from 277 securities (as of September) to 275, equivalent to 53.29% of all 516 common stocks.
3. Trading activity
In October 2009, average daily trading value reached its highest level in 27 months. SET and Market for Alternative Investment (mai)’s combined average daily trading value reached THB27.01 billion (approx. USD810.56 million), the highest level in 27 months, or since July 2007, when the daily average trading value stood at THB32.18 billion (approx. USD965.77 million). In October 2009, the total trading value was THB567.33 billion (approx. USD17.02 billion).
Moreover, retail investors were more active than any other investor groups, accounting for 63% of total trading value. Local institutional investors and the securities companies’ proprietary trading held net sell positions, while retail and foreign investors held net buy positions. Foreign investors have had a net buy position for eight consecutive months. During January – October, 2009, foreign investors had a net buy position of THB55.72 billion (approx. USD1.67 billion), compared to a net sell position of THB162.35 billion (approx. USD4.87 billion) for the whole 2008.
Trading value by industry showed that the share of trading value in the Energy Sector stocks has decreased, while that of the Banking Sector has increased. The share of trading value in Energy Sector stocks has decreased to 27% from 32% in previous month. On the other hand, the share of trading value in Banking Sector stocks has increased to 24%, after dropping during the past two months. Stocks in the Other Industry Sectors which enjoyed an increase in trading value share were the Agribusiness Sector, up to 4.3% in October vs. a 1.3% in the previous month. Meanwhile, the share of trading value categorized by market capitalization of the stocks was close to that of the previous month. The share of trading value for securities in SET10 group slightly increased to 36%, from 34% in the previous month.
4. Active trading accounts
There were 143,108 active trading accounts as of end-September 2009, a rise of 39% over the same period of last year. The ratio of active accounts to total trading accounts in October rose to 25.8% from the 23.2% of the previous month. The average trading value of THB3.94 million per account in October was an increase of 61% over September 2008.
The number of active internet trading accounts in October 2009 rose 5% over September 2009. Meanwhile, the value of internet trading increased by 118%, compared to that of October 2008, but decreased by 4% decrease compared to that of September 2009. Internet trading value in October 2009 was at THB123.68 million (approx. USD3.71 billion), equivalent to 21.8% of total trading value, a slight decrease from 22.5% in the previous month.
5. Overview of the derivatives market
Gold futures’ trading volume has increased continually and reached a historic high since the start of trading. In October 2009, TFEX’s daily average trading volume was 16,012 contracts, a 22% increase from previous month, due to price fluctuations of the underlying product. Trading volume has increased for every derivative product. The product with the highest trading volume compared to that of the previous month was single stock futures, with an 85% increase, followed by gold futures, up 64%. Gold futures recorded the highest daily average trading volume (new high) for the second consecutive month since the start of trading in February 2009, due to heightened investors’ interest driven by rising gold prices.
6. Overview of the funds raised
In October 2009, listed companies raised total funds of THB2.85 billion (approx. USD85.54 billion) from the capital market, consisting of the funds raised via IPOs of THB248 million (approx. USD7.44 million) by Kiattana Transport PCL (KIAT) and Moong Pattana International PCL (MOONG). Meanwhile, THB2.60 billion (approx. USD78.10 million) was raised through seasonal equity offerings (SEOs). Among the key fund raising activities via SEO were Thai Vegetable Oil PCL (TVO) and PTT PCL’s group at THB845 million (approx. USD25.35 million) and THB582 million (approx. USD17.46 million), respectively.
Special Topic
1. Report on the Banking Sector’s operating performance for Q3/2009
In Q3/2009, the Banking Sector’s operating performance improved, when compared to the same period last year as well as the previous quarter. The net profits stood at THB24.99 billion (approx. USD749.74 million) in Q3/2009, an increase of 12.8% over Q2/2009, or an increase of 5.6% over the same period last year. This is due to rises in revenue from loan fees for retail customers and decreases in loan loss provision. Moreover, banks could maintain the quality of their assets, as demonstrating by the Non-performing loans of 5.7%, a decrease from 5.74% in Q2/2009 and from 6.46% in Q3/2008.
2. Liberalization of stock trading commissions
Given improved environment and industry structure, Thailand’s securities business is better prepared for the upcoming liberalization of stock trading commissions, which will be enforced on a sliding scale basis in 2010, following with the full liberalization in 2012. The industry should be better prepared to cope with challenges from the liberalization than during the previous liberalization in 2000 because of the following reasons:
1. Overall, securities firms have greater financial strength than in 2000: During 2005- Sept. 2009 (excluding the year 2008, when SET was affected by the economic crisis), the securities companies’ average net profit ratio was 20%. Moreover, total shareholder’s equity of all securities firms as of September 2009 reached THB57.13 billion (approx. USD1.71 billion), doubled that of the year 2000.
2. The number of active accounts and average trading value has soared. The number of active accounts per month (monthly average over 9M/2009) was at 102,652 accounts, more than two times of the figure in 2000, which were only 48,432 accounts. Meanwhile, daily average trading value during 2005 – October 2009 was at THB15.87 billion, roughly three times of the figure of THB4.9 billion during 1999-2000 (before the previous liberalization). Moreover, Internet trading, which provides lower commissions compared to other traditional channels, soared, accounting for 21% of total trading value (average rate of 9M/2009), compared to the very low rate in 2000 of less than 0.1% .
3. Securities companies’ variety and diversified sources of income
Income from proprietary trading For the past several years, securities companies have gradually emphasized generating income from proprietary trading, reflected in the increasing proportion of proprietary trading. As of October 2009, proprietary trading accounted for 12% of total trading value, compared only 1% of total trading value during 1999-2000.
Income generated from more financial products In 2006, TFEX launched its first derivatives products, SET50 Index Futures, followed by SET50 Index Option, Single Stock Futures and Gold Futures. Moreover, TFEX plans to launch two more products, mini-gold futures and interest rate futures in 2010. Increased variety of financial products would enable the Thai capital market to respond to investors needs in every market circumstance.
Income generated from a wider variety of services At present, securities companies can generate income form providing various new services including sales representative services for mutual funds and bonds, securities borrowing and lending (SBL), foreign stock trading as well as structured note issuance.
4. Finding alliances to strengthen business competitiveness. Over the years, regulators have relaxed the rules to enable securities companies to flexibly merge their businesses. In 2009, five securities firms merged in part as a preparation for the liberalization in 2012, namely, 1) KTB Securities Co., Ltd. and Seamico Securities Co., Ltd. joined to become KT Zimico Securities Co., Ltd., and 2) Finansa Securities Co., Ltd., Syrus Securities Co., Ltd. and ACL Securities Co., Ltd., combined to become Finansia Syrus Co., Ltd.
For above reasons, securities companies are expected to be able to adjust more efficiently to the challenges from the upcoming liberalization. This should result in greater competition and efficiency as well as high quality services that better respond to investors’ needs.
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