Saturday, May 30, 2009

Thai investors to trade equities listed abroad on a special platform.

Some local brokers allow Thai investors to trade equities listed abroad on a special platform.

By: Umesh Pandey
Published: 30/05/2009 at 12:00 AM
Newspaper section: Business

Have you been keeping track of the double-digit rises and falls of the shares of the global banking giant Citigroup on the Dow Jones?


Do you wish you had the opportunity to buy and then sell it instantaneously and possibly make money from daily stock fluctuations?

Those dreams are now achievable for Thai investors who in the past have been starved of options, especially in equity trading. Various brokers now offer a trading platform that allows investors to play global markets, including some in the region on which Thai investors can keep real-time tabs.

Comforted by ample foreign-exchange reserves, the Bank of Thailand has gradually loosened its earlier stringent rules on foreign investments by Thai nationals. This has given an unprecedented opportunity for Thai investors to tap global markets. Philllip Securities, Finansa Securities and the new player Aira Securities have become industry leaders in offering such products to this niche market of investors looking to invest abroad.

"If you look at the SET, you will notice that the global fluctuations have little impact on the market, especially when other markets are on the upside swing," said Nakorn Kolsrichai, managing director of securities and derivatives business at Aira Securities.

Until recently, despite the near 10% rise of the Dow, the Thai market did not react at all and even fell. This indicates that if Thai investors had diversified their portfolios, they could have seen some positive returns when world markets moved up, he added.

The ability to trade in the global markets, he says, should help investors diversify and leverage their risks instead of focusing only on the Thai markets.

As well, the probability of shares in big markets being manipulated is minimal as trading volumes are so large that a manipulator would require massive sums of money. Only large fund managers have such sums and they do not usually undertake any kind manipulation.


With a lot of companies having dual listings (at home and in international markets such as DJIA or Nasdaq), an investor looking to tap, say, the software boom in India could do so by buying shares of Indian software companies listed in the United States. If an investor wants to tap into growth in the Chinese market, he could do so directly by investing in the H-Shares of mainland Chinese companies that are traded in Hong Kong.

Such investments do not have to go through mutual funds, which in turn buy index funds from major fund managers, a cumbersome and complicated process.

But for those looking to invest in countries they are not very familiar with, the key is to have the knowledge of the market and the companies involved, so it is necessary to read a lot of research on the country and individual equities, Mr Nakorn said.

"The investment trend in the past has been to focus on the United States and the western markets but I would like to recommend Thai investors also look at other markets such as China and India," he said. Investors could indirectly invest in companies from these countries by using the trading network.

Another area where Thai investors could focus is Australia, which is mainly a commodities-based country, and with commodities prices nearly bottoming out it could be a good bet.

All of this is based on real-time trading in most of the markets it covers.

Issues to watch for: Although the Bank of Thailand does allow investors to take out funds from Thailand to invest, there are certain restrictions on repatriation of the funds, especially when a profit is made from the investment.

Although capital gains on equity markets are exempt from any taxes in Thailand, repatriated profits are subject to a tax - and losses are not deductible.

The other drawback is that once the shares are sold the investor has to bring back the funds into Thailand within 90 days or buy back more shares in some other markets.

There are limitations as well on the amount a person can invest outside Thailand. First, investors need central bank permission and individual clients have a limit of $5 million while corporate clients have a limit of $50 million.

In order to be able to trade, investors have to have a cash balance with the broker and Aira offers what it calls as "I cash". Each I cash unit is valued at 500,000 baht. It is based in one currency that can be used to buy shares traded in that particular currency. If the investor wants to buy shares in two currencies then he would need to open two I cash units, or an initial outlay of 1 million baht.

For settlement, the typical rule applies: T+3 (date of trade plus three days) for stocks, warrants and bonds and T+1 (date of trade plus 1 day) for unit trusts and electronically traded funds.

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