by Kannitha Kaewkanya

On January 2, 2003, the SET(Thailand´s main stock index) stood at 351.52. On January 5, 2004, the SET closed at 790.93. It has since retrenched somewhat, but it is still a very impressive performance for a general index, and it still has a much lower P/E ratio than the S&P 500.

There are millions of vacation brochures touting Thailand as a tourist destination for its tropical climate, excellent cuisine and beautiful beaches. It was nicknamed the “Land of Smiles” years before its stock market took off in the mid ´90s, and it retained that sobriquet as its currency and asset prices plummeted in the late ´90s. Now it has clearly come back. Will the surge continue? Will it be a good place to invest? Will it be a good place to practice brokerage?

The good news is that Thailand is politically more stable than ever before and its diplomatic position has strengthened considerably. Although it has been a staunch ally of the United States for decades, it was only on October 19, 2003, that President Bush publicly announced the designation of Thailand as a Major Non-NATO Ally (MNNA). This agreement doesn’t directly influence Thailand’s economic stability, but it is a reflection of the growing U.S. relationship with Thailand.

Thailand still has sporadic guerrilla problems on its borders with Myanmar (Burma) and Malaysia. For this reason, security in Thailand is fairly tight at major institutions (including its stock exchange building). The tight security has been highly successful at intercepting would-be terrorists before they attack the capital.

Thailand’s principal exports are computer parts and electronics. Textiles, rice and tourism also play major roles in the economy. While it lacks large deposits of major mineral resources, Thailand’s trade links are excellent. They have good and growing trade flows with most of the world and this should help the Thai economy to expand for a long time. In addition, Thailand has made large investments in education over the past decades and the results are evident: Adult literacy is over 95 percent.

The market capitalization of the SET is on the order of US $120 billion. Depending on currency fluctuations, Thailand ranks between 32nd and 40th in world market capitalization. Thailand also has a small cap market — the Market for Alternative Investment. Order processing and quotation is fully computerized. There is an ability to put through orders which have been negotiated directly between brokerages within certain guidelines. The current fixed commission on transactions is 0.25 percent. Retail transactions make up over 80 percent of volume in the market. Foreign institutions make up most of the rest. Domestic institutions create less than five percent of transaction volume. The domestic insurance industry and domestic mutual fund industry are relatively small compared to the banks and equity markets. It may be a while before domestic institutions have a much more significant share of trading volume. While domestic institutions will grow, direct retail participation will probably increase just as quickly for a bit. Many more Thais will gain access to the Internet over the next few years and most brokerage firms have some availability of electronic trading. The SET even has its own on-line brokerage called

The SET ( has 49 publicly traded securities firms. Quite a few are affiliated with some of the larger global financial institutions, though not necessarily controlled by them. Most listed companies limit foreign ownership to a maximum of 49 percent, except those in the banking and finance sector which are generally permitted only a 25-percent foreign holding. This puts some important limitations on the ability of foreign firms to operate independently in Thailand. Merrill Lynch briefly owned a majority stake in Phatra Securities, but sold its share to management in late 2003. Merrill Lynch maintains close business ties with Phatra. UBS, Credit Suisse, JP Morgan, HSBC, ING, DBS Vickers, Nomura and ABN Amro maintain a presence in Thailand, but most other global securities firms are represented through alliances rather than ownership.

Kim Eng Securities, Seamico, and ABN Amro/AST are the three largest brokerages by volume. While the profit margin was already a respectable 30 percent on average at the major brokerage houses in 2002, it jumped to almost 40 percent in 2003. The proportion of revenue that went to compensation remained stable at about 50 percent. Given the incredible increase in volume and value over 2003, it is not surprising that revenues and profits at the brokerages went through the roof. ABN Amro/AST saw its profits go from approximately US $6 millio in 2002 to US $19.5 million in 2003.

Costs in Thailand vary greatly between Bangkok and the rest of the country. Bangkok is still less expensive than most U.S. cities, and the rest of the country has an even lower cost base for rent, salaries (for non-commission based workers) and services. These low costs combined with reliable services make Thailand an attractive place in which to invest. However, the market is still relatively small in the world and it will take many years of growth before the Thai market achieves any global prominence.

Thailand will almost certainly grow swiftly over the next decade. This will strengthen its various asset markets and will probably assist the brokerage firms that participate in its markets. There are clues that it is not an especially easy place for foreign investment firms. The regulations on foreign ownership are the most obvious examples of the obstacles to be faced. Yet several large foreign securities firms have a presence in Thailand and have begun to profit handsomely from it. Overall, the prospects for brokerages in Thailand are very good.