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Published on March 24, 2008

The Stock Exchange of Thailand is going through deep soul-searching over its status and its place in the global financial market. Should it embark on drastic reform to stay competitive? Should it undertake demutualisation or corporatisation? Or should it go so far as to launch an initial public offering?

"We are pondering profoundly over what direction we are moving towards because the world is changing very rapidly. If we do nothing, we'll risk being marginalised further over the next four to five years," Kobsak Pootrakool, executive director of the SET Research Institute, said last week.

Kobsak, a central banker on loan to the institute, is working closely with the Boston Consulting Group to map out a strategy for the bourse. The SET does not have a clear idea of where it is heading. Its ownership structure is not transparent. Its accountability has not been defined, although brokers have been dominating its operation.

Indeed, the SET has already been marginalised in the international capital market. Before the financial meltdown of 1997, the SET accounted for some 13 per cent of trade in emerging markets. Now its market share has fallen to 2 per cent. Its weighting in the MSCI Index reflects that.

"This means that global fund managers who base their investment on the MSCI can always pass on Thai stocks," said Sarinee Achavanuntakul, a consultant to the SET Research Institute.

Hong Kong, Singapore and Malaysia have moved ahead in re-inventing their organisations to go public and stay competitive. Local companies have also looked at listing elsewhere in the region, such as Thai Beverage in Singapore, Banpu in Indonesia for its energy operation there, and Amata Group in Vietnam.

Discussion of the SET's reorganisation or demutualisation emerged about eight years ago, but has not made any progress.

Thirachai Bhuvanat-naranubala, secretary-general of the Securities and Exchange Commission, has raised the issue again and has been pushing for the SET to restructure. A week ago, a committee was formed to study this plan and the Boston Consulting Group was engaged to come up with recommendations by May.

Kobsak said the stock exchange faces three scenarios. First, if it does not agree with demutualisation, it would have to undertake reform. In that case, who will be the real owner? To whom will the stock exchange be accountable?

Second, if the stock exchange agrees to change its status into a corporation, without floating shares to the public, it will also have to set a clearer strategy. Should it be accountable to the government, brokers or the investing public?

Third, if the stock exchange agrees to corporatise and float its shares to the public, then it may list its shares on the SET itself. What should be the course of action then?

Eventually, the SET board will have to make the decision on which course to take.

To share opinions among experts on exchange demutualisation, the SET Research Institute and the Association of Securities Companies is holding a seminar tomorrow at the Centara Grand hotel in Bangkok.

Among the scheduled speakers are SET chairman Pakorn Malakul na Ayudhya and Hsieh Fu Hua, chief executive of the Singapore Stock Exchange.

Thanong Khanthong

The Nation