Thailand-China capital market cooperation

By: Dr. Pakorn Peetathawatchai, President, The Stock Exchange of Thailand (SET) Jun 2019

Thailand and China are not only geographically close, but are also tied in terms of economic and capital market growth. This proximity is especially apparent in the South of China where one of China’s two stock markets is located. 23 April 2019 marked a key milestone of Thailand-China capital market collaboration through a renewal of a memorandum of understanding (MoU) between The Stock Exchange of Thailand (SET) and Shenzhen Stock Exchange (SZSE), which began in 2009.

Ten years have passed. Both SET and SZSE have steadily grown. SET has become one of the most liquid exchanges in Asia and is the sole emerging and Asian exchange that received the Market Transparency Award 2018 from the United Nations Sustainable Stock Exchanges (SSE) initiative. On the other hand, SZSE globally ranked No. 3 in terms of trading value, No. 8 in terms of market capitalisation, and No. 11 in terms of the number of listed companies.

In the latest 2019 MoU, both parties agreed to foster closer collaboration among capital markets and SMEs between the two nations, responding to fast changing technology innovation and disruption. Strategically, China's Belt and Road Initiative is instrumental for the benefit of the whole region, boosting Thailand’s key strategies such as the Thailand 4.0, and Eastern Economic Corridor (EEC) - which is a mega infrastructure development program to drive the country’s investment in up-lifting innovation and advanced technology for the future generation - in providing a solid foundation and ample opportunities from cooperation between the capital markets of both countries.

Currently, SET’s market structure consists of the main board, the second board: the Market for Alternative Investment (mai) for SMEs, and the LiVE platform as an integrated virtual pitching platform. As of May 2019, there were 550 companies listed on SET’s main board, 161 listed on mai. Most of the SET 50 constituents are blue-chip companies from the sector of energy, petrochemicals, and finance as well as the well-being sector, which includes industries relating to agriculture, commerce, fashion, food & beverage, healthcare, tourism & leisure, and transportation & logistics.

SZSE has established a multi-tiered capital market. SZSE is home to 2,167 listed companies. There are 761 listed companies on ChiNext Market (a NASDAQ-style board), while a majority of them are from emerging industries and high-tech industries. As of May 2019, SZSE has been dedicated to serving SMEs which have utilised the capital market to raise funds and become champions in niche markets.

Both SET and SZSE share similar initiatives in serving SMEs, which are vital to future economic development. The 2019 MoU has been developed to expand business opportunities for Thai and Chinese SMEs and broaden investment prospects, as well as promote cross-border collaboration between the two countries.

Under this MoU's strategic framework, "China-Thailand SME Capital Market Service Initiative," SET and SZSE will provide information on SMEs, as well as on the financial markets of the two countries via an online portal. SET and SZSE will also enhance the "ChiNext-mai Alliance" network, which aims to facilitate communication and cooperation between companies listed on mai and ChiNext Market. In addition, SET and SZSE will work to enlarge investing and financing channels of the capital markets of the two countries by arranging business matchings and physical roadshows to promote Thai and Chinese securities' growth potential in both countries. The agreement also embraces cooperation for cross-border product development, such as exchange-traded funds (ETFs), depositary receipts (DRs), and indices, including green finance products, among others.

At the first China-Thailand Capital Market Cooperation seminar held in Bangkok in April 2019, two Thai companies successfully launched cross-border roadshow activities through V-Next, a SZSE platform to facilitate investment and financing for entrepreneurship and innovation. This initiative is considered the first roadshow via V-Next in the Thai market. It was well received with an effective promotional campaign. The roadshow helped enhance innovative capital integration and promote the sharing of corporate development activities between investors from both countries. SET and SZSE plan to hold the second Thailand-China Capital Market seminar in Shenzhen during the second half of this year, and will provide online roadshow services through V-Next for Thai companies and institutions related to Thailand 4.0, EEC, as well as the well-being industry.

Capital market cooperation always brings benefits to the real economy and enterprise development of the two countries. Cooperation between SET and SZSE will help companies and investors in Thailand and China to improve their use of capital market tools and to better serve investment and financing needs in both countries in the future.