SET chief mulls opening up central trading system to foreign investors

The move would be part of the revision to the exchange's business plan, which must be adjusted in line with changes in investor behaviour as well as new trading alternatives.

In an interview yesterday, Charamporn Jotikastira said speed was a priority for investors in today's market. Some markets are offering direct access and the Thai exchange could accommodate that, with riskmanagement strategies in place.

"In shaping the business plan, we need to see the overall picture of the global capital market, and in which direction it is moving. Then, our services will be shaped accordingly," he said.

Charamporn believes this will be a way of boosting liquidity, particularly for the top 30 per cent of listed companies, which could be promoted to be on a par with their regional peers.

Supported by liquidity, these companies should enjoy higher trading volume and hence higher prices. With high prices, they could be included in the Morgan Stanley Capital Index, and then they would then fully show their business potential, which they still have despite negative factors at home and abroad.

Thai companies' resilience to the political crisis will also be Charamporn's message to international investors during a roadshow to London from July 1315.

He said that despite a number of crises - from Sars, bird flu and The tsunami to the 2006 coup and current political turbulence - these companies still showed financial growth. Investors should therefore refocus their attention on the companies' fundamentals.

Seventy per cent of companies in the SET 100 Index have paid dividends for three consecutive years, and the market's average dividend yield is 4 per cent.

One of the means of boosting liquidity could be through the Alternate Trading System (ATS), he said.

Deployed in the US and Singapore, the system allows institutional investors to match their sale and buy orders, bypassing brokerage firms.

Charamporn said that if other markets allowed this linkage and the Thai market remained closed to such a move, investors would flee the local bourse.

He also foresees opening up the linkage with other Asean bourses to handle both programme trade and ATS.

Aside from liquidity, the SET has set his sights on introducing new products to attract more investors.

His target is to introduce potential targets for mergers and acquisitions (M&A), particularly those in the informationtechnology industry, which is ready to welcome new partners.

Meanwhile, among 400 listed companies, the exchange will also put those that want to welcome takeover bids into a special group.

Supporting this view is the Capital Market Development Plan. Recently approved by the Cabinet, the plan highlights amendments in the rules to facilitate M&A.

"There are companies that want to sell their existing business and start a new one, like those in the software industry. The second generations of many may also want to relinquish control. Transactions out of the market would do no good to anyone.

"If these companies are listed, they are at some point ready for equity participation while buyers can rest assured that the targets pass some corporate governance criteria.

"We may set a target to execute a certain number of deals each year," he said.

Charamporn also wants to see new products, like target funds and capitalguarantee funds, in order to draw more investment from institutional and retail investors.

Gold and oil funds could also be introduced to attract retail investors and meet rising demand.

At some brokerage houses, thanks to retail investors' attention, derivatives and equities trading accounts are in a 50:50 ratio, he said.

Supporting the expansion will be a new IT system, for which a master plan is being revised. Meanwhile, current IT investment will cover the next five years.

Charamporn said the IT plan required the backing of securities houses, as investment must take place at both the SET and brokerage ends of the operation. Discussion with brokerages will help set new IT parameters, he added.

Having taken up the SET presidency on June 1, Charamporn aims to complete revision of the business plan within three months. Then, once all parties agree with the new path for the Thai capital market, investment can be completed within another 18 months.

"Brokerage houses can survive today, but not in the future. We need to define what we want to be - Siam Paragon, Bon Marche or the agricultural market. Then, we will have the answers to what kind of clients we will welcome, and what they want," he said.