Securities firms seek development guidelines

The Association of Securities Companies (Asco) wants the government and relevant agencies to come up with development guidelines for the Thai capital markets and to amend laws to support self-regulatory organisations (SROs) for higher competitiveness.

There now is more linkage among capital markets, and interested parties need to offer ideas on prioritising and re-evaluating the pace of market development, Asco chairwoman Pattera Dilokrungthirapop said in an exclusive interview with The Nation.

As policy-makers, the Ministry of Finance, the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand may be able to give a helping hand on this, as about 10 years has been wasted on arguments about the liberalisation of stock-trading commissions, she said.

Relevant parties were obsessed with the liberalisation issue and were unconcerned about the development of the capital markets' structure to boost competitiveness and effectiveness, she said. Liberalising commissions is not the final answer for improving the securities industry.

Instead, the answer lies in ways to provide Thai brokerage companies some space and a greater role in the regional market.

"We've wasted 10 years on discussions on the liberalisation of [stock-trading] commissions and demutualisation without building up investors' knowledge base and establishing channels to compete," Pattera said.

"We have not understood yet what will happen when commissions are low. Brokerage firms don't want to weaken and become discount brokerage houses. On the contrary, that may lead to more unreasonable trading and stock manipulation. So making capital markets sustainable means that both brokerage houses and investors must have knowledge and understanding about the capital markets and investment."

What brokerage firms need is a clear plan, she said. Securities companies act as an intermediary for brokerages and the investment banking business, which compete for funds flowing into the country in light of fast-moving capital investment. If Thai brokerages are not able to compete, Pattera asked, how can they attract funds into the country?

Those who can give an answer are securities houses, asset-management companies and financial advisory firms.

"The Thai capital markets are more outstanding, particularly in the variety of investors, than other regional markets. Foreign competitors want to share in the securities business in Thailand. The Thai stock market is resilient to many negative factors and listed companies continue to see earnings growth. This proves the strength of the Thai capital markets. Why don't we help build up the internal base for sustainable growth?" she said.

During her year chairing Asco, Pattera conceded, 40 member companies had collaborated more to help the securities industry survive and compete with foreign rivals.

However, the existing rules and regulations can give oversight and supervision only at a certain level. If Asco is required to become an SRO under SEC policy, the Securities and Exchange Act may need amendment to allow Asco to take on a greater role and be widely accepted in the markets.

"Over the past two years, we have become more serious about making Asco an SRO and have expressed [the need for] fairness in business operations. Recently, we asked our members to put their commissions on their websites for comparison and requested more ethics among members on not copying research. We believe that all brokerage firms need to step forward. But we need direction to strengthen Thai capital markets."

This will be a difficult year for the securities business, given external risks from the European debt crisis, noted Pattera, who is also chief executive officer at DBS Vickers Securities (Thailand).

Domestically, it depends on how fast business operators can recover from last year's floods. The markets could gain confidence in the latter half of this year, she added.

DBS Vickers will concentrate on two plans this year. First is to expand its Internet-based customers for overseas stock trading, and it is now testing a system with DBS Bank in Singapore. Overseas stock trading is expected to start in the second quarter, and high-net-worth investors with knowledge and expertise are targeted. Stock coverage includes blue chips in the United States, Britain and Hong Kong.

The second plan is to issue structured notes in over-the-counter trading after investors subscribed to Bt1 billion in structured notes with reference to stocks in the SET. Such structured notes are yield returns of 8-20 per cent, depending on the stock-market conditions and stocks selected.

"The company will also focus on issuing principal-protected products and expansion of upper-medium individual investors. Most products will be more niche for specific groups to maintain its market share at 2.5 per cent. We maintain our position as a premium brokerage house," Pattera said.