SBL worth a look in uncertain times

Not only stock borrowers but lenders, too, can benefit from SBL in terms of fees that they get while their benefits on behalf of those listed companies' shareholders remain the same as regular shareholders, with the exception of voting rights.

Securities lenders are absolutely riskfree from borrowers failing to send back the securities as they receive collateral to cover the borrowed value.

Due to different securities borrowing and lending fees, investors are advised to shop around.

These days, SBL services are available at 13 financial institutions, including Kim Eng Securities, KGI Securities, Credit Suisse Securities, Trinity Securities, Tisco Securities, SCB Securities, TSFC Securities, Asia Plus Securities, Capital Nomura Securities, Phatra Securities, Citibank NA, Deutsche Bank AG Bangkok Branch and Bank of America.

Capital Nomura Securities is a pioneer in SBL in Thailand and controls onethird of the market. It offers 5.5 per cent a year as an average return to securities lenders and levies a 6percent fee.

The 5.5percent return is attractive and is better than parking stocks in a portfolio during a sagging stock market.

However, not all securities on the stock market are SBL. This is reserved only for stocks in the SET50 Index.

From the 10year track record, 13 of the 52 weeks have been bearish and investors can use SBL - or short selling - to profit during the period, Thanomsak Saharatchai, head of research at Capital Nomura Securities, said.

Investors who adopt short selling are knowledgeable of the overall stock market and economy. They are speculative investors and they can tolerate higher risk than regular investors.

They take borrowing fees and trading commissions into account before making decisions to sell short.

Apart from making profits in a falling market, it can be used as a hedging instrument or even to lower risk by using arbitrage.

For instance, investors borrow PTT stock to short if they predict PTT will sink and long Bangkok Bank if they predict it will increase. Investors might gain a double windfall if both stocks move in the same direction as predicted.