BANGKOK -- The Stock Exchange of Thailand is planning to launch a board that lists securities of its less-developed neighboring countries -- Cambodia, Laos, Myanmar and Vietnam.
It will also introduce, by mid-2018, an index consisting of Thai-listed companies with exposure to the so-called CLMV countries, allowing investors to tap these growing economies, SET President Kesara Manchusree told the Nikkei Asian Review in an interview.
The four countries have stock exchanges of their own but their size and liquidity are far behind that of Thailand, the second-largest bourse in Southeast Asia by market capitalization as of December. The combined market capitalization of Cambodia, Laos and Myanmar is just 0.3% of that of the Thai exchange.
The Cambodia Securities Exchange is one of the world's smallest, with five listings and a market capitalization of roughly $296 million. Still, the country's economy is growing faster than any other in the region, at around 7% a year. Thailand's gross domestic product is growing at a little more than 3%.
Details of the pan-region board are yet to be discussed with the Securities and Exchange Commission. But plans include easing listing conditions to encourage a wide range of companies to join, including those that have not yet gone public in their home markets.
"We will take into account the different accounting methods of each country and may not ask for a three-year record [of earnings] like we do for companies listing on the main board," said Kesara. At present, listings on the main SET board need to be audited by one of the Big Four accounting firms -- and she said that rule, too, may not be applied to the new board.
The CLMV exchanges "are our brothers and sisters ... and they need a lot of funding to develop their countries," Kesara said. "They can raise funds here, trade here and bring back the money to develop their countries."
She added that the Thai bourse and regulators have bilateral cooperation agreements with their peers in the CLMV countries. Therefore, it is easier for the SET to "enforce [any required] changes through the regulators" compared with other countries in the region.
Kesara, who will finish her four-year term in May, said the new board should come online in 2019 or later.
Meanwhile, the SET hopes to cater to growing investor interest in the developing Mekong economies by launching a CLMV exposure index. Companies listed on the Thai bourse that generate 10% or more of their sales in Cambodia, Laos, Myanmar or Vietnam will be selected.
Big names such as Siam Cement Group are expected to be included, as well as some smaller-cap companies. The index will be calculated to balance the price movements of companies of different sizes.
"Investors are interested in CLMV countries but direct investment is difficult because the stock markets are still very small and they don't have custodians," Kesara said.
"We hope to show with this index that Thai companies that have exposure in the CLMV countries will see higher growth compared to those with only domestic businesses."
The SET is also stepping up bilateral cooperation with each CLMV country. It is working with the Lao government to create the country's first infrastructure fund that will securitize hydropower assets. The trust is set to be listed on the Thai bourse, which is expanding its real estate investment trust (REIT) listings.
"We can provide a lot of funding opportunities for Laos, which is looking for international financing of their [infrastructure] projects," Kesara said.
The SET is discussing co-listing stocks with the Cambodia Securities Exchange. "They can list on us and we can list on them," Kesara said, although details are still to be discussed.
Under Kesara's leadership the SET has raised its profile among its peers in the Association of Southeast Asian Nations. "We have moved from just a domestic market to a global market," she said.
"We have completely changed our profile in terms of making people know that we are among the leaders in ASEAN exchanges."
The SET now boasts the highest turnover and the largest number of initial public offerings annually in the region. Market capitalization increased by roughly 28% from the end of 2014 to 2017. As of December, it ranked second in the region at $548 billion after the Singapore Exchange, whose market capitalization is 40% bigger. The Indonesia Stock Exchange ranks third with a market capitalization of $520 billion.
The SET hopes to grow with more new listings, including those from abroad. For 2018, it is anticipating an additional 550 billion baht ($18 billion) in market capitalization through new listings. By 2021 it hopes to achieve a market capitalization that will be 50% bigger than Thailand's GDP, Kesara said. That would be around $600 billion based on the 2016 figure.
At the beginning of 2018, the benchmark SET index hit an all-time closing high, surpassing the previous peak set in 1994. Kesara said this symbolized that the SET was moving to the next stage in its development: "We are entering a new index level and that means we are moving up [as a bourse] too."
One of Kesara's last accomplishments at the helm of the SET will be the introduction in March of the T+2 system -- the settlement of trades after two businesses days from the initial transaction. Currently, the exchange uses a T+3 system.
"We are moving ahead of other major ASEAN exchanges," Kesara said, noting that the newer exchanges such as Vietnam and Laos had adopted the shorter cycle from the start.
"Even Singapore hasn't announced the date to launch T+2," she noted.