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.

Calypso System integrates with Bloomberg server API via Sky Road

Calypso Technology, Inc, a global application software provider of an integrated trading and risk management application suite to the capital markets industry, today announced the integration of the Bloomberg Server API (application programming interface) with the Calypso Platform via Sky Road LLC, a leading solutions provider to the financial community. The Bloomberg Server API is a significant enhancement to the multi asset class portfolio and risk management hosted solution that Calypso Technology and Sky Road launched in 2005, that has redefined the space with custom capabilities and unprecedented asset coverage. Bloomberg has completed the certification of the API integration and Bloomberg's high-quality real-time data is now available to Calypso Technology and Sky Road joint clients. Calypso Technology and Sky Road undertook this initiative to ensure that their clients have access to reliable and accurate market data from the leading providers.


The Bloomberg integration represents continuing growth of the Calypso Technology and Sky Road strategic partnership formed in 2005 to leverage the Sky Road platform on Calypso Technology's end-to-end derivatives and treasury processing solution to deliver cross-asset, front-to-back office trading capabilities in a flexible, hosted environment. The strategic partnership has resulted in numerous joint customers in the US and UK, with several new fund managers expected to license the solutions by year end 2010.

John Borse, CEO of Sky Road, notes, "We're very excited to be offering our clients access to Bloomberg data. The joint clients of Calypso Technology and Sky Road need sophisticated market data alternatives and we believe that the Bloomberg Server API integration will open up new opportunities and benefits for these firms."

Charles Marston, CEO of Calypso Technology, comments, "Since Calypso Technology and Sky Road first joined together, we have continuously worked closely together to develop what is a very powerful hosted solution, uniting the sophisticated technology and innovations of both firms to deliver the Calypso-based Sky Road solution. As we develop new ways to meet the needs of our clients, we look forward to the continued success of our partnership with Sky Road."

FUTURES FOCUS

       The SET50 Index closed last week at 483.67 points, a decrease of 19.73 points or 3.92% from the previous week. For SET50 Index Futures, the nearest contract month S50Z09 (expiring in December 2009), was settled at 476.4 points, a decrease of 23.6 index points or 4.72% from a week earlier.
       At the beginning of last week, the Dow Jones Industrial Average (DJIA) declined because of more stock selling in many sectors, concern about the consumer confidence index and the fall in single-family home sales after successive increases since June. However, on Thursday the DJIA increased sharply after the release of many better-than-expected economic indicators. Most notable was the US third-quarter GDP, which grew at an annual rate of 3.5% after having contracted for more than a year, which influenced the confidence in economic recovery and listed companies' earnings. Even so, the Dow still shed 2.6% on the week to close at 9,712.73.
       In Thailand, the SET Index continued decreasing from the previous week because many foreign investors remained concerned about the strength of the economic recovery,while local investors remained in wait-and-see mode. Moreover,the Thai market would remain under pressure due to the Map Ta Phut case. A hearing on the government's appeal of the Administrative Court decision is scheduled for today.
       On the TFEX, average daily trading volume was 18,136 contracts, an increase of 1,468 contracts from the previous week. Open interest was 44,614 contracts, an increase of 876 contracts from the previous week.

Gold soars further as investors hedge against dollar, inflation

       Gold advanced to a record for a second consecutive day as investors bought precious metals to hedge against a weaker dollar and faster inflation. Silver reached a 14-month high and platinum the most in 13 months.
       The dollar index, a six-currency gauge of the dollar's value, slumped to the lowest level since August of last year on bets the Federal Reseve will trail other central banks in increasing borrowing costs.
       Gold reached US$1,070.80 (Bt35,812) in London, while futures rose to $1,072 in New York as crude oil, used by some investors as an inflation guide, reached a one-year high. Taiwan's central bank said it might consider placing more of its reserves in gold.
       "Most of the gold rally has been attributable to a weaker dollar," said Tobias Merath, head of commodity research at Credit Suisse Group in Zurich. "We are in uncharted territory. You still have robust investment flows and we think gold can easily reach $1,100 an ounce" this year, he said.
       Immediate-delivery bullion added $1.15, or 0.1 per cent, to $1,065.45 an ounce by mid-morning local time. Spot prices have advanced 21 per cent this year and are heading for a ninth annual gain. December futures were 0.1 per cent higher at $1,066.40 an ounce on the New York Mercantile Exchange's Comex division.
       "What's happening it that they are selling out of dollars and buying equities around the world, currencies and of course gold," said Mark Pervan, head of commodity research at ANZ Banking Group. "The dollar is being held hostage to increased rish appetite."
       Taiwan may consider buying more gold, its central bank governor Perng Fai-nan told reporters in Taipei yesterday. The news helped boost bullion prices, Credit Suisse said in a note.
       The dollar index slipped 0.5 per cent yesterday, taking its loss this year to 7 per cent. Oil futures gained as much as 1.4 per cent to $75.15 a barrel in New York and have soared 68 per cent this year.
       "The all-night printing runs at the Treasury are chipping away at the dollar's ability to hold value compared to other currencies and commodities," Mike Sander, in Seattle, said on Tuesday. "With dollar weakness, inflation fears, a huge budget deficit, energy prices creeping up, metals such as gold, silver and copper will be pushed up in price."
       US President Barack Obama has increased US marketable debt to a record as he borrows to reignite growth in the world's biggest economy. That's boosted speculation increased money supply will debase the currency and spur inflation.
       The Federal Reserve has cut its main interest rate almost to zero and backed asset purchases and credit programmes to combat the recession. Chairman Ben Bernanke is leading plans to buy mortgage-backed securities, federal agency debt and treasuries.
       "A weakening US dollar and easy liquidity conditions will mainly favour precious metals, and we expect prices of gold, silver and platinum all to register further gains over the next year," Morgan Stanley analysts said in a report yesterday.
       Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged for a fourth day at 1,109.31 metric tonnes on Tuesday, according to the company's website. Assets in ETF Securities' exchange-traded products added 0.6 per cent to a record 8.493 million ounces on Tuesday, its website showed.
       Silver jumped as much as 1.7 per cent to $18.085 an ounce, the highest since July of last year, and was last at $17.97. Platinum rose to a 13-month high of $1,365.50 an ounce before trading at $1,362 and palladium added 0.6 per cent to $330.60 an ounce.

Short-term correction flagged

       Gold experts caution investors to be wary of a short-term correction, even as prices for the precious metal continued to rise yesterday on concerns about the US dollar's depreciation.
       Gold prices in Hong Kong were quoted at $1,055 to $1,056 per ounce, up from Monday's close of $1,049 to $1,050. In the local market, buying prices were fixed yesterday at 16,550 baht per bahtweight (15.16 grammes), up 100 baht from Monday, according to the Gold Traders Association.
       Satit Wannasilpin, managing director for GT Wealth Management, said gold prices could test $1,150 in the short term as investors sought a hedge against the depreciating US dollar.
       Demand for gold from investors in the Middle East seeking an alternative investment to dollar-denominated assets is also driving metal prices upwards.
       Mr Satit said many countries have cut back their holdings of US dollar assets in their reserves for fear of further dollar depreciation.
       The US dollar now counts for less than 50% of international reserves, compared with an average of 60% five years ago and about 80% earlier this decade,he said.
       "Many countries are reducing their USD holdings in their international reserves in exchange for gold. But if the global economy continues to recover,we may see a decline in gold prices on cyclical factors," Mr Satit said.
       He said gold was unlikely to fall under $1,000 per ounce in 2010.
       Kritcharat Hirunyasiri, president of MTS Gold, said investors should consider taking profits with the runup in prices.
       Gold this week should trade between $1,030 and $1,060 per ounce, he said. If prices stand above $1,030 for a week,then technical factors could push prices to test $1,100."In any case, investors who are investing in gold futures should raise their reserves to 100,000 baht per contract from 70,000. The extra 30,000 baht will help serve as a cushion in case prices decline," said Mr Kritcharat.
       Gold futures traded on the Thailand Futures Exchange are set for 50 bahtweight of gold per contract. Mr Kritcharat recommended that investors should closely monitor price trends, and revise their strategy if prices fall by more than 300 baht per baht-weight as margin calls could result in a sharp slide in prices.
       The Futures Industry Club, meanwhile, has agreed to introduce a new futures contract for 10 baht-weight starting in the first quarter of 2010. Brokers also want to extend trading hours for gold contracts to midnight, resulting in an overlap with New York trading hours.

New one baht-weight gold contract could spur trade

       The futures industry club will propose a new one baht-weight (15.16 gramme)gold futures contract to help attract retail investors interested in the gold market.
       Kampanart Lohachareonvanich, the chairman of the Association of Securities Companies, said that reducing the nominal value of gold futures contracts would help reduce the entry costs for investors and increase trading liquidity on the Thailand Futures Exchange.
       The current size of gold futures contracts traded on the TFEX is 50 bahtweight, a size set quite high compared with other derivatives markets worldwide.The contract size was set high in part to placate local gold retailers, who were concerned that the launch of gold futures earlier this year would draw investors away from the physical market in favour of derivatives.
       Mr Kampanart noted that in India,contract sizes were only eight grammes,or little more than half of one bahtweight of gold.
       He noted that India's futures market also offered currency futures for US dollars and rupees.
       The TFEX and the Securities and Exchange Commission also want to introduce currency futures in the local market.But plans have been delayed amid concerns by the Bank of Thailand that such derivatives could be abused to speculate against the baht.
       "India is not concerned about speculation because it limits currency futures trading to domestic investors only," Mr Kampanart said."The SEC is considering using the same principle for the Thai market and will propose a plan to the central bank."
       He said currency futures would be useful for Thailand given the economy's heavy reliance on international trade.Futures contracts would be a key tool for importers and exporters to hedge against currency risk.

GOLD "PRIMED TO HIT $2,000"

       An expert predicted gold would hit US$2,000 (Bt66,700) per ounce after it climbed to a fresh all time high of $1,058 yesterday as the US dollar's slump prompted investors to buy commodities as a hedge against potential inflation.
       Bullion is heading for a ninth annual gain as the US Dollar Index, a six currency gauge of the dollar's value, has shed 6.5 per cent this year. The price of gold hit a fresh record high above $1,058 an ounce here yesterday as the dollar renewed its fall.
       Immediate-delivery bullion yesterday advanced as much as $14.28, or 1.4 per cent, to $1,058.48 an ounce and was at $1,054.45 at midmorning in London. December gold futures were 1percent higher at $1,055.10 an ounce on the New York Mercantile Exchange's Comex Division after climbing as high as $1,059.60.
       Gold may top $2,000 an ounce in the next decade, said investor Jim Rogers.
       "People are printing money, gold is going up," Rogers said, adding that he might increase his holdings.
       "There are plenty of reasons to buy gold when the time is right," he said.
       "Bullish gold gave support to the price of other commodities, including rubber," said Kazuhiko Saito, chief analyst at Tokyo based broker Fujitomi. Rubber futures gained as much as 2.1 per cent.
       Local gold bar prices were quoted at Bt16,450 per baht weight for buying and Bt16,550 for selling, while gold ornaments were quoted at Bt16,206.04 for buying and Bt16,950 for selling.
       Kritcharat Hirunyasiri, president of the Mae Thong Suk (MTS) Group and director of the Gold Traders Association, said gold would likely reach US$1,100 an ounce this year after continuously breaking records.
       "Most investors have sold gold bars, while only 0.5 per cent of them have bought gold. They wanted to sell for a profit first. If they really want to invest, they must hold it long term. Those wishing to invest short term should instead do so in the derivatives market, which is more volatile," Kritcharat said.
       MTS is a brokerage member for gold futures on the Thailand Futures Exchange. The group established MTS Gold Futures for this purpose.
       Kritcharat said lately, the derivatives market for gold futures had been very active, with higher trading volume and a new record for daily trading volume: 3,380 contracts, up from 900 a day over the past seven months.
       The dollar traded at 1.4762 against the euro late yesterday morning in Singapore, from 1.4691 the day before. It fell earlier this week on concern the US Federal Reserve would be slower to raise interest rates than policymakers in other nations.