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.