The Malaysian and Singaporean stock exchanges are seeking to attract
individual investors and bolster volumes by offering cross-border trading, the
first step in creating a Southeast Asian platform.
Singapore Exchange Ltd. (SGX) and
Bursa Malaysia Bhd. (BURSA) start offering the services today, while the Stock
Exchange of Thailand is poised to join the link-up between the Association of
Southeast Asian Nations members next month. The three account for 67 percent of
the total market capitalization of the Asean Exchanges group, which includes
Indonesia, the Philippines and Vietnam’s two bourses.
The trading platform is part of a
push by Asean Exchanges to bolster regional capital markets and lure more
investors to bourses whose companies had a combined market value of $1.98
trillion at the end of March, according to the group’s website. Japan and Hong
Kong’s equity markets were valued at $3.79 trillion and $3.11 trillion at the
time.
“We are now creating more
investment opportunities across this region and it will spur liquidity,”
Tajuddin Atan, chief executive officer of Bursa Malaysia, said in a Sept. 14
interview. “We will now embark on education, marketing and promotion at the
Asean level. It will take a little bit of time for traction.”
The combined average daily value
of stocks traded in Malaysia, Singapore and Thailand this year is $2.5 billion,
or about a fifth of Tokyo’s $13.5 billion daily average, according to data
compiled by Bloomberg.
Latin America
The Asean trading platform
follows a similar initiative connecting Colombia, Chile and Peru that opened on
May 30, 2011. Mila, as the Latin American market is known, handled $2.3 million
of stocks in August, up from $854,000 a year earlier, according to data on the
Santiago stock exchange’s website. Turnover on Chile’s IPSA Index alone was
about $15.9 million last month, compared with the $78.46 billion that changed
hands on Brazil’s exchange, data compiled by Bloomberg show.
The Southeast Asian link is “more
political than it is practical, but it’s a good start and a good step in the
right direction,” Lee Porter, Hong Kong-based head of Liquidnet Asia Ltd.,
which offers alternative trading platforms, said in a Sept. 6 interview. “I
don’t think it’s going to change anyone’s world.”
Individual investors will be able
to access stocks outside their home exchange through a local brokerage that is
able to connect with a counterpart on the Asean bourse where they wish to
trade. The broker-to-broker link is to ensure that the transaction follows
local regulations, according to a Sept. 6 statement from the Singapore
Exchange.
No Cost Savings
Stock trades through the new link
will be cleared and settled in the country where they are listed, not in the
one where they are purchased. That means there aren’t any cost savings for
international firms that can already trade in the individual countries,
according to Jessica Morrison, Deutsche Bank AG’s Hong Kong-based head of Asia
Pacific market structure.
“The Asean link would get much
more interesting for the international firms if the top regional hot stocks
could be traded on a single platform with one process for clearing and
settlement,” Morrison said in a Sept. 6 interview. “That is when the cost of
capital, the ticket costs involved in settlement, and the currency risk could
be reduced.”
A lack of knowledge of overseas
companies may hamper individual investors’ ability to trade shares outside
their home market, Kongkiat Opaswongkarn, chief executive officer at Asia Plus
Securities Pcl, Thailand’s third-biggest stock brokerage by value, said on
Sept. 3.
Bigger Markets
“It’s unlikely that we will see
any large trading of companies in Southeast Asian countries through this
facility by Thai investors,” Kongkiat said. “Thai retail investors have very little
knowledge of companies in neighboring countries. I prefer to advise my clients
to trade in the bigger markets especially the U.S. and other developed
markets.”
The Philippine Stock Exchange may
need as long as two years before it’s ready to join the Asean link, Chairman
Jose Pardo said in May. The bourse needs to boost trading volumes and expand
the number of listed companies, Pardo said. The Philippines’ $212 billion stock
market is Asia’s 12th largest.
In appealing to individual
investors, the Asean exchanges are seeking to tap a class of investors that
have benefited from Southeast Asia’s economic growth. Malaysian and Singaporean
per- capita gross domestic product has climbed more than 90 percent in the past
20 years, according to World Bank data.
Educational Process
In Malaysia, retail investors
accounted for 18.6 percent of the value of stock traded in August, exchange
data show. While not directly comparable, some 9.4 percent of people in China,
41 percent in Australia and 18 percent in the U.K., invest in markets, Thomas
Mathew, joint secretary to India’s President Pranab Mukherjee, said in a Sept.
5 interview.
The question is whether
individual investors will participate, Soo Hai Lim, the Hong Kong-based manager
of the Baring ASEAN Frontiers Fund, said by phone on Sept. 17. The exchanges
“have to start educating the retail investors in their own markets about
companies in other markets,” said Lim, whose fund had $451 million of assets,
according to data compiled by Bloomberg.
Thailand’s exchange is poised to
join the trading link in October, after giving Singapore and Malaysia
“two-to-three” weeks to resolve any early problems, President Charamporn
Jotikasthira said in an Aug. 29 interview.
Asean Stars
The link may lead to further
collaboration such as post- trade settlement and harmonization of polices,
procedures and rules, Bursa’s Tajuddin said. The regional exchanges will be
promoting so-called Asean Stars as an asset class, comprising the 30
most-traded names from the six participating countries, he said.
The Singapore Exchange, under
pressure to expand since Australian regulators rejected its $8.7 billion bid
for ASX Ltd. in April 2011, has added products to its derivatives business and
has been tying up with data centers globally to offer better connectivity for
investors. The bourse’s shares added 0.1 percent to S$7.13 as of 11:13 a.m.
local time.
The Asean trading link “is the
first step in the process of capital-markets integration and collaboration,”
Nels Friets, senior vice president at Singapore Exchange, said on Sept. 11. “It
offers stockbrokers more cross-border opportunities.”
Eleni Himaras and Gan Yen Kuan
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, you may contact us at: sbc.pte@gmail.com, provisionally. Many thanks.
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