One Asset Management, its consortium and representatives from the Securities and Exchange Commission and the Stock Exchange of Thailand are to ask the Bank of Thailand to relax its harsh currency control measures for the sake of Thailand's first equity exchange-traded fund (ETF), to be launched in the next quarter.

"If the measure remains effective on mutual fund business, the equity ETF will be affected because it is accounted as one type of mutual-fund product," bourse senior vice president Sethaput Suthiwart-arueput said yesterday.

However, he said the main driving force to make the equity ETF work would be retail investors.

The bourse is confident that One Asset's team - comprising KGI Securities, Kim Eng Securities, CitiCorp Securities, Bualuang Securities and Thanachart Securities - is the key to attracting retail investors.

The group holds more than a 20-per-cent share of trading volume on the stock exchange and more than a 30-per-cent share on the Thailand Futures Exchange.

"If retail investors give an active response to the equity ETF, institutional investors will follow. It will be another interesting tool for investors to arbitrage between the cash and futures markets," Sethaput said.

According to the consortium's proposal recently accepted by the bourse, One Asset will act as fund manager and KGI will be market maker, while the other four will be participating dealers. It hopes to persuade other brokerages to join as dealers later.

The equity ETF will track the SET50 index.

"We'll have to see the liquidity of all 50 stocks in the SET50. Initially, we'll keep all 50 stocks. However, if we consider that some of them don't have enough liquidity, we'll have to cut some out," said One Asset president Somjin Sornpaisarn.

One Asset, KGI and the bourse will inject a total of Bt900 million into the fund. It is expected to reach Bt1.9 billion in size this year, and is projected to grow by 30 per cent to 50 per cent in the second and third years.

An ETF is an open-ended fund that tracks specific indexes and with unit trusts that can be traded like securities. It will mainly involve five parties: the SET, a fund manager, a trustee, an index vendor and a participating dealer.

Separately, Bualuang Securities president Yarnsak Manomaiphiboon said the firm's revenue from commission fees from derivatives trading on the Thai Futures Exchange was expected to rise from last year's less than one per cent of revenue to about 4 per cent this year.

Bualuang is financial adviser for two property funds, Yarnsak said. One of them, worth about Bt3 billion, is expected to be launched this year.

Piyarat Setthasiriphaiboon

The Nation