For some years now, even before I retired from the Singapore Exchange S68 (SGX), local stakeholders have lamented that the equities turnover on the Stock Exchange of Thailand (SET) had overtaken that of Singapore.
In fact, Thailand was the region’s IPO market kingpin until Indonesia overtook it in 2021, fuelled largely by tax incentives for listing companies.
With a population of 72 million, or a quarter of Indonesia’s, Thailand has a GDP per capita of US$7,100 ($9,506), which is almost twice that of Indonesia’s GDP per capita of US$4,000 but still a tenth of Singapore’s.
Demographics alone is not an excuse why Singapore’s capital market has stayed relatively stagnant on market cap and turnover while Thailand has outstripped its Asean peers in the last decade. The 2010s in Thailand were comparable to the 1990s in Singapore when many old-time investors still viewed the market’s pre-Clob heydays with rose-tinted glasses. At that time, retail participation was high with queues snaking around Raffles Place for IPO prospectuses. Mega floats of national companies like Singtel made first-time — and subsequent — stock investors out of tens of thousands, if not more. Bankers waded into broking and wealth management, bringing new investors to the market and eventually creating the private banking hub that is Singapore today.
There were ample local fund managers, including stars like Ng Soo Nam of the Schroders Singapore Fund, managing money on behalf of international investors as well as retail investors trying to make some money through unit trusts. NTUC Income anchored the State Street Exchange Traded Fund listed on the SGX with up to $1 billion in assets early on while a host of long-forgotten boutique funds were active in IPOs and the secondary market.
Over time, to be competitive with international financial institutions, the brokers, banks and asset managers based here channelled more local wealth overseas. As local “stockist” proprietary or “prop” traders including Lee Co, GK Goh and Kim Eng went into retirement, some traders shifted their punting to the Thai market which was more volatile and attractive. This then became self-fulfilling.
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They were in good company as the number of Thai retail speculators grew alongside an emerging and captive local fund management ecosystem, with bankers who could not channel Thai domestic funds overseas easily due to caps imposed by the Bank of Thailand (BoT) adding fuel to the fire. It was also accelerated by the success of Thai single-stock derivatives, which attracted global capital and arbitragers to join the fray. The conservatism of our local investors and global promiscuity, coupled with Thai captive capital and underpinned by fast-growing demographics, perhaps contextualises our local lament.
However, the current situation is not an inevitable conclusion. Thai companies seeking international capital have been listed in Singapore. This included DTAC in 1995 during the boom years of the “Asian Tigers”. After a wild ride, DTAC was listed back on SET in 2007 and delisted from Singapore in 2014. Sri Trang Gloves STG was secondary-listed in May 2021, a decade after parent Sri Trang Agro did the same thing in 2011. TCC’s Thai Beverage Y92 , which was listed on the SGX in 2006, not only exported Chang Beer to the US on its first anniversary of listing but also acquired Fraser & Neave (F&N) and now collectively has a cluster of REITs and property companies listed here with assets all over the world. While the spinoff of ThaiBev’s beer business in Vietnam has yet materialised, the combined value of its listed entities in Singapore is more than five times greater than during its IPO.
Singapore still plays a role in Thailand or other emerging markets — much like London in Europe — helping to raise non-baht financing. Both local and international issuers will struggle to deploy baht proceeds from an IPO on SET for overseas use as it is constraining and costly. The Asian Currency Unit (ACU) and US dollar (USD) debt markets in Singapore are unrivalled in Asean and SGX remains the largest G3 bond listing venue in Asia. SGX has started to list Thai Depository Receipts for select Thai companies. It is not clear if this will either boost volumes for SGX or assist Thai companies in raising consistent international capital. Much better for all is for the harmonisation of rules and regulations, and a trading and clearing link.
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Digesting the last decade
I made a whistle-stop trip to Bangkok last week. In just a day, I ticked many boxes in between meetings, business visits, meals and traffic. This included getting a suit (with a fitting at 10pm after being measured after breakfast), a midnight foot massage before an early morning return flight, getting some cheap non-prescription household medication and stopping by the Erawan shrine to pray for peace before receiving heartening news about the Gaza truce in the evening.
There was a strange familiarity as the Singdollar (SGD) is now at an almost two-decade-high since the fixed-rate regime back in 1997 of THB25 to the SGD gave way. Over the years, in line with the relative economic strength, the baht strengthened to as much as the THB19–21 range but is now back above THB26 to the SGD.
This as the SET50 is down more than 15% from its 52-week high, having failed to hang on to 1,000 points. Brokers are complaining that foreign interest in the market has dwindled compared to the time former prime minister Thaksin Shinawatra returned from his exile as the new government was being formed.
Thailand’s last major IPO, Central Retail Corp, which raised THB78 billion just before the pandemic, is barely unchanged from its debut price despite the recovery. The US$1 billion IPO of Big C Corporation, a brand well-known among Singaporean shoppers, has also been delayed. With the opening of new retail investor accounts slowing and anaemic volume compared to 2021, foreign participation and prop traders have had a harder time turning a profit.
The domestic consumer boom, driven by a rising middle class, which made retail and F&B names such as Siam Paragon household names, has slowed with the pandemic. Businesses that were highly dependent on tourism are still some ways from a complete turnaround. Sure, the number of visitors has recovered from 0.43 million in 2021 to 22 million last year and is set to reach 25 million this year. Still, this is a far cry from 40 million in 2019 just before the pandemic.
Absence of Chinese tourists
Despite China’s staggered reopening this year, the outflow of tourists, who are mostly on cheap package tours and contributed to the 2019 record, is still largely absent. Last year, during my visit in May before the requirement to be tested for Covid-19 on arrival was lifted, the staff at the outlet malls near the airport resorted to practising their rusty Mandarin on me. Mandarin is also seen on signs at the airport and heard over public announcements. It is also in the malls where trained service staff speak the language.
However, No more bets, this summer’s hit movie in China about citizens getting tricked into working in illegal “call centres”, has largely kept Chinese tourists away. I could not help but wonder if the chap I had tried to help on my way out of the airport, who was lost and searching for his gate 10 minutes before departure, would suffer the same fate. The recent shooting in Bangkok that killed three, including a Chinese visitor, did not help either.
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Anecdotally, the purchasing power of Chinese tourists and expenditure for those who ventured out are lower in part due to the Chinese economy as well. Case in point: There is a world-class eco-forest property project less than an hour out of central Bangkok, where retirement homes and hospitals will be built amid lush tropical forests. Partly managed by Six Senses, under IHG Hotels and Resorts, the properties have largely been sold despite costing up to US$10 million each. During the site visit, the only potential buyer coming to view was a mainland Chinese couple. What this shows is that at the luxury end, demand and consumption are still inelastic.
The other pillars of Thailand’s economy are agriculture and industry. In the age of friend-shoring and supply-chain redirection, Thailand’s ascent in the 1990s and 2000s and strength in areas like auto parts appear to be going through some disruption. Chinese businesses have shifted factories and production largely to Vietnam which is a key beneficiary as a friendly node in the vast US market, according to data from The Economist. For EVs and other tech consumables, even Malaysia has been a beneficiary.
Thais lament that the lack of focus on the economy by the military governments of the recent past is showing up in terms of the country’s share of Asean post-Covid recovery. Last week’s slower-than-expected 3Q GDP numbers, up by just 1.5% y-o-y, was the slowest quarter this year.
Will a new compromise government between two political groups (military and Pheu Thai whom they had ejected twice through coups) sitting as strange bedfellows to keep arguably the winner of the election, Move Forward out of government, make a difference? Or will Thai corporations who have overseas interests need to find another home? The proposed reverse takeover of 3Cnergy with DTGO’s $1 billion UK hotel portfolio is another example.
Clearing roadblocks
Since the Skytrain opened in Bangkok in 1999, I have spent less time stuck in traffic along the key arteries of Sathorn, Siloam or Sukhumvit roads, where I could have walked to my next meeting quickly. Back then, I was working on some projects involving DBS’s acquisition of Thai Dhanu Bank, which subsequently merged with two other banks in 2004.
This, together with jumping on the back of a motorcycle or a tuk-tuk, still works better in rush hour. My last two visits post-Covid saw fewer traffic jams as infrastructure improvements, coupled with lower economic activity, made it a more pleasant commute. I even made it to the airport from Chit Lom in 25 minutes although it was just before the morning rush.
In the past, it was believed that the previous Thai king, who was revered by all, controlled power, with a supportive military and an effective civil service. Politicians come and go but so long as the centre held, industrialisation, the economy and GDP per capita grew. More recently, with a vacuum at the royal centre, a more ambitious military and what is claimed, a more corrupt civil service, there is a lack of direction.
It is therefore imperative for large family businesses to drive change and even continue their noble obligation of supporting the people, jobs and welfare. A number of these conglomerates domestically are investing in technology and AI with fintech and entrepreneurship hubs. Thailand’s young population is very digital-enabled. The government is also proposing a signature plan of injecting US$14 billion into the economy via a “digital wallet” handout scheme of THB10,000 to 50 million people to spend in their localities within six months.
The impact of these measures has yet to be factored into government forecasts of up to 3.7% GDP growth next year, assuming a recovery of foreign visitors to 35 million and a recovery in exports in 2024 from a contraction this year. With the BoT expected to hold rates at a decade-high 2.5%, this may keep the baht weak and help stimulate exports and a recovery in real estate.
While it remains to be seen if these forecasts will become reality next year, the SET50 does look more attractive at these levels since there is no interest now. Companies on SGX like ThaiBev that trade at less than 13x P/E after a 9% fall in results in FY2023 ended September, could be a cyclical bet for 2024’s economic upside, or CPAll’s DR. Will Thailand be my dark horse for 2024? Like Japan late last year when we called, a few of the ingredients are coming together.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
