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Published on January 3, 2008

Last year, six listed companies - Aapico Forging, Ayudhya Auto Lease, SCB Leasing, Rajadamri Hotel, Standard Chartered Bank (Thai) and United Communication Industry - delisted their stocks voluntarily. The six firms had a combined market capitalisation of Bt22.71 billion, well below the Bt105.08-billion total market capitalisation of the 12 new stocks that debuted on the Stock Exchange of Thailand (SET) in 2007. However, the newly listed market capitalisation based on their initial public offering (IPO) prices was Bt10.2 billion, excluding the market capitalisation of Total Access Communication (DTAC), which made a dual-listing in the Thai stock market.

Another four companies - Magnecomp Precision Technology, Advanced Agro, Pack Delta and Hua Thai Manufacturing - are in the process of voluntarily delisting from the Thai stock market.

Almost all of them cited the information-disclosure requirement and the fact that they no longer needed to raise funds from the stock market as the main reasons for voluntarily delisting.

Take, for example, Advanced Agro. Thailand's second-largest pulp and paper producer complained the company's stock price did not reflect its real asset value. Advanced Agro will delist its stock from the SET to list in foreign stock markets.

Apart from the spate of companies that are delisting, the listing of Thai-owned companies abroad is another threat that is reducing the SET's competitiveness.

Last year, Thoresen Thai Agencies subsidiary Mermaid Maritime sought listing on the SGX and Banpu's Indonesian mining unit, Indo Tambangraya Megah, on the Indonesia Stock Exchange.

Previously, Thai Beverage - Thailand's largest brewer and alcohol producer - listed its stock on the SGX. The Chang Beer brewer at that time raised 1.37 billion Singaporean dollars (Bt32 billion), marking Singapore's largest IPO deal in 13 years.

 Also threatening the SET is the advent of Catalist to replace the Sesdaq market - the SGX's second-tier market - and allowing financial advisers to approve the listing of companies on Catalist without the stock authority's endorsement, a move that is aimed at increasing flexibility for listed companies, particularly foreign ones.

The worst is not over yet. Thailand's State Enterprise Policy Office - a government unit set up to supervise the privatisation of state enterprises - expects no state enterprises to be privatised in the next two years. This is because the privatisation process has become more cautious, in order to prevent a repeat of court cases like those brought as a result of the privatisation of PTT and the Electricity Generating Authority of Thailand (Egat).

The Supreme Administrative Court nullified Egat's privatisation in 2006. On December 14, 2007, the court ruled against a petition to delist PTT but ordered it to transfer three natural-gas pipelines back to the government on the grounds that the pipelines were state property.

Voluntary delistings, Thai-owned companies going public abroad and a lack of state enterprises seeking listing on the local bourse will shrink the SET's size and lower foreign investors' interest.

SET chairman Pakorn Malakul Na Ayudhya admitted it was difficult for the Thai stock market to compete with other bourses in attracting global savings, given its small market.

"We must develop the stock market in many regards, in order to sharpen our competitiveness. Otherwise, we may lose the opportunity to increase the number of listed companies, because they may seek listing abroad," he said.

At present, there are 521 companies listed on the SET and the Market for Alternative Investment, and their combined market capitalisation - about Bt8 trillion - accounts for 90 per cent of the Kingdom's gross domestic product. However, the SET is small as seen by the fact that it weighs only 2 per cent in the Morgan Stanley Capital Index's Asia Ex-Japan category.

KTB Securities managing director Chupong Tanasettakorn said the number of Thai-owned companies seeking listing in foreign stock markets kept rising as the size of the SET shrank, compared with other stock exchanges.

The Thai stock-investor base is relatively small and insufficient for large companies to raise funds from the SET, while foreign stock markets offer much higher funds, he said.

"The country's economic growth is quite saturated, and that's why many local companies choose to expand their business abroad. When these Thai firms operating abroad need to raise funds from the public, they seek listing in their resident countries, because this may be more worthwhile than listing in the Thai stock market," he said.

The SET and the Securities and Exchange Commission have cooperated in amending listing regulations that form obstacles for companies seeking a listing. However, this has not proven enough compared with other stock markets offering more relaxed listing regulations for foreign companies, he said.

Siriporn Chanjindamanee

 The Nation