Stocks in Thailand are traded on The Stock Exchange of Thailand (SET). In 1999 the SET established the Market for Alternative Investments (MAI), which is an exchange where small Thai companies can offer shares to the public.
Stocks on the MAI have smaller market capitalizations than those listed on the SET and are less established. Both exchanges offer stocks with volume and opportunity for global inventors. Before investing, traders should understand Thai stock regulations, the size of the market, major indexes, liquidity, Thai currency, as well as ways to domestically invest in Thailand.
Thai Stock Market: Size and Indexes
According to the World Federation of Exchanges, as of January 2014 the SET had a market capitalization of $346 Billion. For comparison, the Nasdaq has a market capitalization of $5.998 trillion and the NYSE $17 trillion.
While there are a number of SET indexes focusing on various stock groups within the Thai economy, there are three main indexes.
- The SET (Composite) Index represents the price movement of all common stocks listed on the SET.
- The SET 50 and SET 100 Indexes are based on the price movements of the 50 and 100 largest companies, according to market capitalization, listed on the SET.
Current index prices and updates are available on the SET homepage at http://www.set.or.th/en/
Thai Stock Market: Prominent Stocks and Liquidity
Thai stock prices are in Thai baht, and while the exact exchange rate fluctuates, 1 Thai Baht equals about $0.03 USD. Therefore, divide the Thai Baht price by 33 to get an approximate price in USD. For current exchange information see XE.com: Thai Baht to USD
There are a large number of very liquid stocks on The Stock Exchange of Thailand, and the Market for Alternative Investments. Daily top gainers, top losers and most active stocks are updated daily on the SET Top Ten page.
The following are the most active stocks on the MAI exchange:
Some investors are more interested in market capitalization and stability than volume. Figure 3 shows the largest companies according to market capitalization on the SET (these 20 stocks have the largest market cap of the SET 50).
Non-voting Depository Receipts (NVDR) are also available for trade. NVDRs trade like the underlying stock and investors can receive dividends, but all voting rights are stripped. Foreigners to Thailand cannot own more than 49% (cumulative) of a company; if that limit has been reached, additional foreign investment in that company is not allowed. NVDRs have no such restriction, making them a viable option, or even first choice, for investing in Thai companies.
The SET provides current volume and price data on all NVDRs: http://www.set.or.th/set/nvdrbystock.do
Thai Stock Market: Operation and Risks
Thai trading hours are different than those in the U.S. Notably, there is an intermission that separates the trading day into a morning and afternoon session.
Figure 4 shows how the trading day operates.
During the Auction period, orders are collected and matched at one price based on supply and demand; this creates the Open and Close prices. Automatic Order Matching is equivalent to the U.S. markets, where bids and offers interact with each other for instant execution.
There are multiple order types available, including limit orders, market orders, market-to-limit order (market only to current bid or offer), at-open order (buy/sell on open) and at-close order (buy/ sell on close).
Shares are traded in board lots, which are 100 shares of a stock each. Stocks that consistently trade at a value above 500 baht can be traded in 50 share lots.
Spreads vary by the price of a security.
The risks associated with Thai stocks are those associated with any stock. Thailand is an emerging economy, offering stocks with great potential, but losses also occur. Trading stocks with high volume and large market capitalization provide some stability, although it won’t guarantee profitable trades.
Capital gains are tax-exempt (in Thailand) for individual investors; dividends are subject to a 10% withholding tax and interest income has 15% withholding tax .
Thai stocks are priced in Thai baht, so not only do investors need to concern themselves with the direction of the stock, but also the currency. A decline in the baht will have a dampening effect on returns once the stock is sold and the baht converted back to the U.S. dollars. An increasing Thai baht has a positive effect on returns.
Before investing or trading in a foreign market, it is important to understand how that market operates. Make small trades at first, until comfortable with the process and regulations. Once experienced, then move on to trading your typical position size.
Domestic Ways to Invest
There are a number of ways to invest in India stocks from within the U.S.
ETFs are traded on U.S. exchanges, priced in U.S. dollars and provide a basket of Thai stocks.
Another way to invest directly in Thai companies is through American Depositary Receipts (ADRs). These are foreign companies listed on U.S. exchanges, so they are accessible to investors and priced in U.S. dollars. Currently there are no ADRs listed on major U.S. exchanges such as the NYSE or Nasdaq, but 55 ADRs are available in the U.S. in the over-the-counter (OTC) market, which is less regulated than the major exchanges.
For a full list of currently available Thailand ADRs, see topforeignstocks.com
Sponsored ADRs are issued in participation with the foreign underlying company, whether as unsponsored ADRs are not.
The Bottom Line
Thailand is an emerging economy and while the size of the market remains small compared to the U.S. there are many stocks that provide significant volume and market capitalization to warrant foreign investment. Stocks are priced in Thai baht, and the exchange rate fluctuates, which could result in improved or reduced performance. Foreign investors can trade NVDRs with no restrictions but may face foreign ownership restrictions when attempting to buy regular stocks (if there is lots of foreign investment in those stocks already). ETFs and ADRs provide a way for investors to participate in the Thai market using U.S. exchanges and U.S. dollars.