Guru Speak: A welcome new investment option

The foreign-listing rules, which have been accepted by both the SEC board and the SET board of governors, mark the first phase for the Thai capital market in welcoming foreign issuers.

Candidates must already be listed in an exchange or primary market that is a member of the World Federation of Exchanges, and the candidate's home exchange must be regulated by a member of the International Organisation of Securities Commissions. These requirements are to enable information-sharing and cooperation between the relevant exchanges and securities commissions in order to ensure that the rights of Thai investors will be at least as protected as those of investors in the candidate's home exchange.

Candidates must also meet or exceed minimum requirements for Thai listed firms regarding size, years of being listed and degree of free float, so that the foreign firms meet quality and liquidity standards applicable to their Thai counterparts.

For companies, the listing of foreign firms on the SET opens doors for both Thai and foreign organisations that operate regionally or globally. The opportunity to raise funds in Thailand will not only pave the way for overseas companies to expand their presence here, but also enable Thai firms with overseas subsidiaries or joint ventures abroad to raise funds from their home country, where they are best known - Thailand.

For investors, listing of foreign firms on the SET gives them new investment choices. In the past, those wanting to invest in listed firms abroad went through foreign investment funds or through brokerage firms with overseas offices. But now, they will be able to directly buy shares of the foreign firms in the Thai market, settling in baht.

However, there are some key differences between foreign and domestic shares that investors should be aware of. For example, after listing on the SET, the foreign issuer will mainly be focusing on complying with its home exchange's regulations in order to reduce the additional cost of maintaining its listing status on both exchanges. Therefore, investors must become familiar with the rules of the exchange in question. Also, because shares of the company in question will be traded simultaneously in both the home exchange and the SET, differences in prices and trading rules should be taken into account for every investment decision.

For the next step, the SET will request that the SEC allow foreign companies to have the SET as their primary listing, thus further enabling offshore firms to be listed here and giving more investment choices for Thai investors.

Details of the new regulations can be found at www.sec.or.th and www.set.or.th.