Beyond Bangkok

The outlook for cross-border listings within ASEAN has improved with Thailand looking to promote itself as a regional related destination and Bangkok’s liquid equity market may appeal to some foreign issuers over Singapore.

Attracting cross-border listings has been the dream of many stock exchanges in South-East Asia, as cities vie for position as a regional financial centre. Singapore has found some success with companies from China and India now listed on the Singapore Exchange, but deals have been few and far between.

Now, Thailand, ASEAN’s most liquid stock market, has drawn up plans to become a regional listing hub, hoping that its close economic connections will make it a natural destination for fast-growing companies in the region’s frontier markets.

“We are closer to the CLMV (Cambodia, Laos, Myanmar and Vietnam) nations and are more familiar with them. We can focus on deals for respectable tier-two companies,” said a banker at Maybank KimEng.

Thailand’s Securities Commission and the Stock Exchange of Thailand will first target subsidiaries of existing Thai companies in these countries.

“At the same time, foreign issuers will be able to tap funds in Thailand more effectively and will also enjoy the liquidity in the Thai capital market when listing their shares on our local stock exchange.”

“We can start with Thai companies’ subsidiaries in CLMV, such as hydro powers in Laos and industrial estates in Vietnam and Myanmar,” the banker said.

Thai-owned companies operating in these countries are natural listing candidates for the SET, as in the example of telecom infrastructure firm HyalRoute Communication Group. The company, which is building a telecom network in Myanmar, has selected Hong Kong for its IPO, in part because its owner is Chinese.

In an effort broaden its stock market, Thailand has been encouraging listings of infrastructure funds and real estate investment trusts. Sam Kendall, global head of equity capital markets at UBS, puts this down to the fact that Thailand has not yet seen the same extent of privatisation as Singapore.

In the early stages, bankers expect the listings to be in the US$50m–$100m range, given the small to medium-sized nature of these economies. Kendall expects the potential listings out of these countries to be small to start with because many of them have regulatory, currency and ownership controls.

The Thai regulator is backing the plan to attract foreign listings. Last year, the exchange issued draft rules allowing primary and dual shares offerings from foreign companies and soon plans to put out final regulations.

“As we open our market to foreign issuers, Thai investors will be able to diversify their investments with more variety of investment choices,” said Vorapol Socatiyanurak, Secretary-General of the Securities and Exchange Commission, Thailand.

“At the same time, foreign issuers will be able to tap funds in Thailand more effectively and will also enjoy the liquidity in the Thai capital market when listing their shares on our local stock exchange.”

Liquid hub

Data from the SET shows an average daily trading value in 2014 of Bt45.47bn (US$1.38bn), the highest in ASEAN for three consecutive years.

Vorapul said CLMV companies offered potential growth and diversification benefits.

“We have seen an increase in demand from our local investors, both institutional and retail, seeking investment in CLMV companies,” he said. “By offering and listing their shares on the Thai stock exchange, CLMV issuers will be able to leverage on the Thai capital market to increase their international profiles, competitiveness, as well as visibility, as they enter the ASEAN Economic Community.”

Vorapol does not see Thailand’s move to attract more regional listings as a competition to other regional stock exchanges. In fact he sees more cross border listings as helping develop ASEAN as a single market.

“With the upcoming ASEAN Economic Community, it will be beneficial for companies, particularly ones with regional presence, to have access to wider pool of capital and facilitate cross-border investments,” he added.

Under the draft rules, equity offerings from foreign companies must comply with laws and regulations in home jurisdictions and should also adhere to Thai rules on shareholder protection. At least two Thai residents should serve on the board of directors, of which at least one should be an independent director and audit committee member. The financial statements must be prepared in accordance with Thai accounting standards or International Financial Reporting Standards and the auditors must be on the SEC’s approved list. Similarly, the financial adviser must be on the approved list and should have provided related services for three years.

Thai-based holding companies with major foreign shareholders and overseas core businesses will be subject to the same rules as foreign issuers. Holding companies with majority Thai shareholders or under the control of Thai shareholders will be subject to the rules applicable to Thai companies.