Singapore - Asean Trading Link rolls out next week

SINGAPORE: Investors, brokers and listed companies are set to benefit when the Asean Trading Link rolls out next week.

The Singapore Exchange (SGX) and Bursa Malaysia will be the first to be linked from 18 September.

But some said initial take-up could be slow. Market players do not expect a big fanfare when the Singapore and Malaysian exchanges resume their trading links next week.

The two markets used to be linked through the Central Limit Order Book system (CLOB). However, that was disbanded during the Asian financial crisis.

But what they do see is the long-term benefit of gaining access to new markets with the launch of the link to other exchanges like Thailand and Vietnam.

The collaboration among the Asean Exchanges brings together seven exchanges from Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

Executive vice president and head for sales and clients at Singapore Exchange, Chew Sutat, said: "As exchanges, our role is to try to bring as much liquidity as possible and capital to support our listed companies, and to help investors actually find opportunities to invest. So to the extent that the link brings Malaysia, Singapore and Thailand closer together and can help our investors and our companies, we think it's a good thing."

The link to Thailand's stock exchange is set to go online in October.

Once that is up, investors can buy Thai shares directly from their local brokers.

For instance, a Singapore investor who wants to buy Thai shares will place their orders through a local broker. The order goes directly into the SGX via the Asean Trading Link instead of having to be routed to another broker in Thailand.

This will result in cost savings and more efficient trades for the investor.

Managing director of Phillip Securities, Loh Hoon Sun, said: "From the stockbroker's point of view, our counterparty risk is much reduced. In other words, SGX becomes our counter party instead of individual brokers in each country. And also, there will be just one set of commission. So that will also be cheaper, better for the investors.

SGX, Bursa Malaysia and Thailand's SET accounts for about two thirds of the US$2.1 trillion market capitalisation of the seven member exchanges.

The link to the other exchanges are expected to follow in the coming months.

While the platform allows investors to trade a wider range of stocks, experts said it will take some time before things pick up.

Loh said: "I don't think there will be too much difference or too much benefit. But I think when the whole Asean link project is completed, I'll expect there'll be more interest to trade stocks outside their own countries."

Industry players also caution about the risks and potential pitfalls.

President of The Society of Remisiers, Albert Fong, said: "They must be very mindful of the trading settlement procedures. Each country has its own settlement procedures. On top of that, there is the currency fluctuation matter that we have to consider."

Experts said investor education is key for the platform to take off.

Chew said: "Investors whenever they invest in overseas markets, they need to understand the underlying regimes, what are the rules and regulations in place. And there are a lot of information and regulation that are required. This is no different from what they are currently doing now. Going through the link does not dramatically change this. It just provides more access. But it means is that what we have to do collectively is make this information more widely available."

- CNA/ck

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