The Stock Exchange of Thailand is pushing companies to invest in less developed neighboring countries to benefit from higher growth rates, bourse President Charamporn Jotikasthira said in an interview.
Thailand’s annual economic growth rates of 4 percent to 5 percent are “not as exciting as the countries surrounding us,” he said in Bangkok yesterday. “I’d rather see all of them going abroad more.”
The exchange on Sept. 1 will ease rules for listing joint ventures that are often used in cross-border transactions. It will also soon establish trading links with Singapore and Malaysia that will make it cheaper for retail investors to buy shares in those countries, Charamporn said.
Bangkok-based Thai Beverage Pcl (THBEV) and PTT Exploration (PTTEP) & Production Pcl are leading an overseas push as Thai companies look for new markets. Thailand’s economy is about twice the combined size of Cambodia, Laos, Myanmar and Vietnam, countries with 176 million people that the International Monetary Fund estimates will grow 6.4 percent on average next year.
“Thailand is playing a very important role in that regional growth,” Jason Cox, co-Head of Asia Pacific Global Capital Markets at Bank of America Merrill Lynch, said in an interview yesterday. “The country is well positioned to take advantage” of higher growth rates in Cambodia, Laos, Myanmar and Vietnam, he said.
Thai companies have spent more than $21 billion buying overseas assets from the beginning of 2008, according to data compiled by Bloomberg. That compares with about $1.5 billion from 2003 to 2007.
Thai Beverage, Thailand’s biggest beer maker, agreed last month to pay S$2.78 billion ($2.2 billion) for a 22 percent stake in Singapore-based Fraser & Neave Ltd. The move prompted Heineken NV, the world’s third-biggest brewer, to bid S$5.6 billion this month for a controlling stake in Asia Pacific Breweries Ltd. (APB), which is partly owned by Fraser & Neave. Thai Beverage, which is listed in Singapore, has since raised its stake to 29 percent, spending a total of S$3.6 billion.
PTT Exploration, Thailand’s only listed oil and gas explorer, offered 240 pence a share for Cove Energy Plc (COV) in May. The bid, which valued Cove at 1.2 billion pounds ($1.9 billion), had acceptances from 97.8 percent of Cove holders as of Aug. 24.
“In the past Thai companies were staying here,” said Charamporn, a graduate of Harvard Business School who previously worked at Siam Commercial Bank Pcl. “ I’d rather see them be ready to operate in many, many countries.”
Southeast Asia’s second-biggest economy expanded 4.2 percent in the three months through June from a year earlier, after growing a revised 0.4 percent in the previous quarter. The state forecasting agency said this month that gross domestic product may increase 5.5 percent to 6 percent in 2012 from a previous range of 5.5 percent to 6.5 percent.
Thailand has room to cut interest rates to protect its economy as the worst of the effect from Europe’s sovereign-debt crisis is yet to come, central bank Governor Prasarn Trairatvorakul said in an interview yesterday. Thai businesses are also getting used to investing more abroad, he said.
“For the past year, including this year, although we had inflows of capital, we have outflows to rebalance it,” Prasarn said. “You don’t observe any significant increase in our official reserves at the moment.”
The stock exchange will soon help retail investors benefit from increased regional links with a trading platform as early as October that will allow them to buy shares in Malaysia and Singapore as if they were Thai stocks, Charamporn said. Investors who use the platform will be exempt from paying capital-gains tax, he said.
The 491-member SET Index (SET) has gained 18 percent this year, second in Asia only to the Karachi Stock Exchange 100 Index, according to data compiled by Bloomberg. The benchmark’s $325 billion market capitalization is about 10 times bigger than the indexes in Vietnam.
Cambodia’s only stock began trading in April, while Laos opened a bourse with two stocks last year. Myanmar plans to open a stock exchange by 2015.
The SET has moved to help Thai companies with subsidiaries in those countries to raise funds by reducing the minimum stake a holding company must invest in its main business to facilitate ventures with foreign firms. The measure, which will take effect in two days, will immediately help Ch. Karnchang Pcl raise money for a power plant in Laos.
Under the new rule, the construction company will list CK Power Ltd. as a holding company for hydropower projects in Laos. Ch. Karnchang, PTT and Electricity Generating Pcl are among major shareholders in the $3.6 billion project.
“The success of CK Power would jump-start a lot of ventures like this for sure,” Charamporn said, declining to mention other companies that are considering similar proposals.
With Europe’s economy floundering, he expects more assets to be up for sale soon, and said Thai companies are well positioned to buy.
“Most Thai entities which have an ability to acquire or have acquired something in the past are fairly cash rich.” Charamporn said. “We hope they succeed.”
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