Etf offers chance to get into energy

TMB Asset Management will from July 21 to 28 run an initial public offering of its MTrack Energy Exchange Traded Fund. The passive fund will closely mirror the performance the Stock Exchange of Thailand's largest sector.

The energy sector shares 36 per cent of the bourse's market capitalisation, with PTT and its subsidiaries accounting for the bulk of the stocks.

With the recent spell of bad political news, stock prices have plummeted across the board. The energy sector in particular has seen its price-to-earnings ratio shrink to about nine times, Jotika Savanananda, CEO of TMB Asset Management, said yesterday.

Considering the earnings of these energy companies, this is an extremely good value, he said. Most research houses have been bullish about the sector's earnings outlook.

According to Tisco Securities' latest report, this year's earnings growth is forecast at 9.5 per cent and next year's at 15.3 per cent. The key drivers are Banpu, which is riding on a stronger global coal price, and PTT Exploration and Production, also benefiting from the rise in commodity prices and the start-up of new projects.

The companies were the only two in the energy sector with double-digit price/earnings ratios, while the others have dwindled.

The trend points towards greater consumption of oil, gas and coal - the three main energy sources in Thailand - said Thongtip Ratanarat, an adviser and consultant with the Petroleum Institute of Thailand.

But oil would benefit the most under such brutal market conditions, since it is irreplaceable, especially as fuel for vehicles, she added.

With stock-like characteristics, an ETF is convenient to trade. Its net asset value per unit would be reported every 15 seconds.

Like any fund, MTrack Energy has a custodian and is regulated by the Securities and Exchange Commission. But unlike a mutual fund, after the IPO investors have to trade ETF

units through brokers, or if in larger lots, participating dealers: Phatra Securities, Nomura and Tisco Securities.

These market-makers will provide liquidity by acting as the middleman in creating and redeeming investment units. The ETF's price will be determined by dividing the sector index

by 4,000, Jotika said. Currently,

that would amount to about Bt5 per ETF unit.