Thai stock markets as an exit for tech investment
The outlook for tech stocks in the Thai stock market has a huge bearing on the development of institutions like venture capital, angel funds, and seed funds among Thai investors. Thai stock markets are the investment exit Thai investors are most familiar with. Therefore, the prospect of commanding a good share price and a healthy trading volume in the Thai stock exchange is a big influence on their decision to invest in tech start-ups either directly or indirectly through funds mentioned above.
There are quite a number of stocks labelled under the category "technology" in the Thai bourse. When we look closely, the majority of "technology" stocks fall into these major categories: 1) carrier and service provider, 2) contract manufacturing, 3) system integrators and trading houses, 4) software houses and content providers, 5) equipment manufacturers. In my personal opinion, the types of companies that Thai start-ups could and should aspire to become are number 4 and 5, which are driven by innovation and creative capabilities instead of capital and connections.
Except for large-cap mobile operator stocks, the remaining Thai tech stocks can be considered a sideshow compared to the blue-chip stocks, which command the majority of trading volumes. Most Thai investors have limited knowledge of technology business. It is no surprise that they choose to invest in businesses that they can understand more easily than those they find esoteric like tech businesses.
In addition, value investment, which is an increasingly predominant school of thought for stock investment in Thailand, (the major proponent includes Warren Buffett, once the richest man in the world), are not very helpful for tech stocks either. It champions stocks that are underpriced in some ways, eg price below book value, high dividend yields, low price-to-earning multiples. Even though tech stocks are not explicitly forbid as value investment, they are usually viewed as speculative and avoided by value investors. We hardly hear of value investors talking about investing in tech stocks, let alone championing it.
All in all, Thai stock markets are not particularly tech-stock friendly. Tech companies that are qualified to get their companies listed in Thai markets should be aware of that. They might be able to get their companies listed, but the trading volume and the liquidity are questionable. Stock price can also be subject to speculation, as investors lack a good understanding of the business. Tech companies looking to go public should also explore overseas stock markets as well.
In any case, I really hope that in the end, tech companies find a good exit in the Thai stock market. It is much cheaper to go public here than overseas. Also, that's how other successful tech ecosystem operates - US, Japan, Israel, China, Korea all have active tech stock investment. I think that if we have a case of home-run tech stock, the investment scene will drastically change in favour of tech companies. Whatever the school of thought is, if there is a case for a great return on investment, investors will accommodate their thinking and allow themselves an alternative theory.
Jay Jootar is CEO of The VC Group and Lecturer at College of Management, Mahidol University