Thailand, Malaysia and Singapore are taking the lead in making seven stock markets in six Asean countries a global force to be reckoned with through a push for greater cooperation within the Asean Exchanges (AE) and the launch of the Asean Stars Index.
“When large foreign funds look to invest, they will look at the size of the market capitalisation of each exchange,” Charamporn Jotikasthira, president of the Stock Exchange of Thailand, said during a visited to the Hanoi Stock Exchange last week. He noted that according to the World Federation of Exchanges, the SET is ranked 26th, “but if we combine the seven markets in the Asean Exchanges, we will be seventh altogether”.
He said companies listed on the SET, Bursa Malaysia (BM) and the Singapore Exchange (SGX) could raise capital in one another’s markets with combined resources in terms of strong technological infrastructure, matching engines, and negotiation time. Listed companies in these three markets will also be able to raise capital in the Hanoi Stock Exchange (HNX), the Hochiminh Stock Exchange (HOSE), the Indonesia Stock Exchange (IDX), the Philippine Stock Exchange (PSE) and vice versa.
The three markets in Thailand, Malaysia and Singapore account for 70 per cent of the combined US$2 trillion market capitalisation of the seven stock exchanges, which have more than 3,600 companies in total.
According to the World Bank, the Asean countries are expected to average 6-per-cent growth in gross domestic product from 2011-2015 among their 568 million inhabitants.
The seven stock markets have signed a memorandum of understanding under the brand Asean Exchanges with projects such as the Asean Trading Link on their agenda.
Asean Trading Link uses a fibre-optic Intra-Asean Network, which currently connects the SET, BM and SGX exchanges at a hub through a gateway called the Asean Common Exchange (ACE) interface.
Through the ACE, local brokers can send and receive trades to the link partners in Thailand, Malaysia and Singapore. The three countries are working together to promote and expand the Asean Trading Link.
Charamporn revealed that this Friday, the Asean Exchanges would join forces with the FTSE Group, a global leader in indexing, to create the Asean Stars Index to promote the development of Asean as an asset class and to boost the region’s competitiveness.
The new index will comprise the top 180 stocks representing 30 companies in each country in the AE.
Besides promoting the AE, the SET also provides support to other exchanges, especially in frontier markets. For example, the Thai bourse has provided the blueprint and maintenance for the HOSE’s trading system. As Hanoi has created its own system, the SET’s support for HNX concentrates on upgrading other basic infrastructure.
“The Hanoi Stock Exchange can learn a lot from the SET, as we are a brother and we are a friend, but the HSX is also a student, especially in terms of corporate governance,” said Tran Van Dzung, chief executive officer of the Hanoi bourse.
The HSX currently trades around Bt900 million per day with a market capitalisation of Bt190 billion and a price-to-earnings (P/E) ratio of 19 times, while HOSE is currently trading around Bt2.6 billion per day with a market capitalisation of Bt1.5 trillion and P/E ratio of 13 times.
Dzung also mentioned a possibility of a combination of the HSX and HOSE in the future.
“The combination [would be] a good decision, since it would provide investors with a one-stop integrated index system along with a larger market capitalisation and the involvement of the larger companies from the Hochiminh Stock Exchange,” he said.