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Stock Exchange of Thailand (SET)

The Stock Exchange of Thailand (SET) is the national stock exchange of Thailand. It is located in Bangkok. The indices of the stock exchange are SET Index, SET50 Index and SET100 Index.

History

The modern Thai Capital Market traces its origins back to the early 1960s. In 1961 Thailand implemented its first five-year National Economic and Social Development Plan to support the promotion of economic growth and stability as well as to develop the Kingdom’s standard of living. Following upon this, the Second National Economic and Social Development Plan (1967-1971) then proposed for the first time that an orderly securities market be established in order to mobilize additional capital for national economic development.

The creation of Thailand’s first officially sanctioned and regulated securities market was initially proposed as part of the Second National Economic and Social Development Plan (1967-1971). In outlining its proposal for the creation of a supervised securities market, the Second National Development Plan stressed that the market’s most important role would be to mobilize funds to support Thailand’s industrialization and economic development.

The modern Thai capital market can essentially be divided into two phases, beginning with “The Bangkok Stock Exchange” which was privately owned, followed by the establishment of “The Securities Exchange of Thailand”.

Establishment of the Bangkok Stock Exchange

The inception of the Thai stock market began as far back as July 1962, when a private group established an organized stock exchange as a limited partnership. The group later became a limited company and changed its name to the “Bangkok Stock Exchange Co., Ltd.” (BSE) in 1963.

Despite its well-intended foundation the BSE was rather inactive. Annual turnover value consisted of only 160 million baht in 1968, and 114 million baht in 1969. Trading volumes continued to fall sharply thereafter to 46 million baht in 1970, and then 28 million baht in 1971. The turnover in debentures reached 87 million baht in 1972, but stocks continued to perform poorly, with turnover hitting an all time low of only 26 million baht. The BSE finally ceased operations in the early 1970s.

It is generally accepted that the BSE failed to succeed because of a lack of official government support and a limited investor understanding of the equity market.

Establishment of the Stock Exchange of Thailand

Despite the failure of the BSE, the concept of an orderly, officially supported securities market in Thailand had by then attracted considerable attention. In this regard, the Second National Economic and Social Development Plan (1967-1971) proposed, for the first time, a plan for the establishment of such a market, with appropriate facilities and procedures for securities trading.

In 1969, as recommended by the World Bank, the government acquired the services of Professor Sidney M. Robbins from Columbia University to study the development channels of the Thai capital market. Professor Robbins had previously served as Chief Economist at the United States Securities and Exchange Commission. The same year proved an eventful one for the Thai capital market, as the Bank of Thailand also formed a Working Group on Capital Market Development, which was assigned the task of establishing the stock market. A year later, in 1970, Professor Robbins produced a comprehensive report entitled “A Capital Market in Thailand”. This report became the master plan for the future development of the Thai capital market.

In 1972 the Government took a further step in this direction by amending the “Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings Affecting Public Safety and Welfare”. The changes extended Government control and regulation over the operations of finance and securities companies, which until then had operated fairly freely. Following these amendments, in May 1974, long-awaited legislation establishing “The Securities Exchange of Thailand” (SET) was enacted. This was followed by revisions to the Revenue Code at the end of the year, allowing the investment of savings in the capital market. By 1975 the basic legislative framework was in place and on April 30, 1975, “The Securities Exchange of Thailand” officially started trading. On January 1, 1991 its name was formally changed to “The Stock Exchange of Thailand” (SET).

Roles

Legislation establishing “The Securities Exchange of Thailand” (SET) was formally enacted in 1974 and the SET began trading on April 30, 1975. On January 1, 1991 “The Securities Exchange of Thailand” officially changed its name to “The Stock Exchange of Thailand” (SET).

As defined in the SEA (1992), the SET’s primary roles are: To serve as a center for the trading of listed securities, and to provide the essential systems needed to facilitate securities trading; To undertake any business relating to the Securities Exchange, such as a clearing house, securities depository center, securities registrar, or similar activities; To undertake any other business approved by the SEC.

Operations

•    The Stock Exchange of Thailand is a juristic entity set up under the Securities Exchange of Thailand Act, B.E. 2517 (1974). Operations started on April 30, 1975.
•    Its mandate is to be a market or center for the trading of listed securities, and promoter of financial planning, as well as provide related services connected to such activities, without distributing any profits to members.
•    Encourage the general public to become shareholders in a variety of local industries.
•    It operates under the legal framework laid down in the Securities and Exchange Act, B.E. 2535 (1992).
•    Its main operations include securities listing, supervision of listed companies and information disclosure, trading, market surveillance and member supervision, information dissemination and investor education.

Trading System

This section describes the SET’s trading facilities, details on trading rules, and information on Internet trading.

Fully Computerized Trading System

The SET has operated fully computerized trading since April 1991, through the “Automated System for the Stock Exchange of Thailand”, or ASSET, which enables trading to be efficient, equitable and fluid. In this trading system, two principal methods of trading are available: Automatic Order Matching (AOM) and Put-Through transactions (PT).

Two Trading Methods

1. Automatic Order Matching (AOM) Trading

AOM trading performs the order matching process according to price, then time, priority, without human intervention. After brokerage houses electronically send buy or sell orders from their offices to the SET mainframe computer, the ASSET system queues the orders and arranges them according to a price-then-time priority. This means orders are first grouped according to price, with the best price taking precedence. Then, within each price group, orders are arranged according to time. In terms of the matching process, there are two methods: continuous order matching and call market method. Continuous Order Matching procedures operate during the regular trading sessions. The ASSET continuously matches the first buy and sell orders in the queue, and at the same time, confirms each executed transaction via the member’s (broker’s) terminal.

The Call market matching is utilized in calculating the opening and closing prices of a security at the opening and closing of the trading hours. This method allows brokers to enter their orders to be queued for matching at a specified time at a single price that generates the greatest trading volumes for that particular stock. Automatic Order Matching (AOM) Trading

2. Put Through (PT) Trading

The ASSET also allows brokers to advertise their buy or sell interests by announcing bid or offer prices. Members may then deal directly with each other, either on behalf of their clients or for themselves. Prices may be adjusted during the negotiation; hence, the effective executed price may not be the same as that advertised and may not follow the price spread rules. After concluding negotiations, dealers must send details of the result(s) to the ASSET for recording purposes.

Trading hours

Trading on the SET is conducted on all bank business days, normally from Monday through Friday. Each day there are two trading sessions: morning (10:00-12:30) and afternoon (14:30-16:30).

Trading units

Generally, each trading unit, a so-called “board lot”, contains 100 units of each security; however, for each security priced at 500 baht or more for 6 consecutive months, one board lot is equivalent to 50 units.

Price regulations

Floor and Ceiling Limits

On 1 December 1997, the SET introduced new floor and ceiling price limits for trading. The former limits allowed stock prices to fluctuate within a range of 10 per cent, while the current limits allow prices of a stock to fluctuate within a range of 30 per cent of the previous closing price on the main board. However, if the market price is less than 1 baht, stock prices may fluctuate within a range of 100 per cent of the previous closing price. Ceiling and floor limits apply to each trading board utilizing the AOM system, with the exception of the foreign board.

Circuit Breaker

Together with the introduction of the floor and ceiling trading limits, the SET also implemented a circuit breaker system to ease any unusual volatility in the market that may cause investor panic.

The circuit breaker functions as follows:

First stage: If the SET index falls by 10% from the previous day’s close, all trading in listed securities will be halted for 30 minutes.

Second stage: If the SET index falls by 20% from the previous day’s close (i.e., another 10%), trading in all listed securities will be halted for one hour.

If the trading time left in a session is less than 30 minutes, or one hour (as the case may be) after the circuit breaker comes into effect, trading will be halted until the closing time of that session, and the trading will then resume in the next session.

Industry Group Indices and Sectoral Indices

In addition to the SET Index, which is calculated from the prices of all common stocks on the main board, The SET also provides industry group indices and sectoral indices. Both these types of indices are calculated from the prices of the common stocks which share the same fundamentals which characterize each particular industry group and sector, respectively.

The index calculation methodology is identical to that of the SET Index which is a market capitalization weighted index. The Industry Group and Sectoral index calculations are adjusted in line with the same factors that influence the calculation of the SET Index. These influencing factors include the shifting of a stock from one sector to another sector or the shifting of a stock from a sector in one industry group to a sector in another industry group. In addition, the base date of the Industry Group Indices is on December 31, 2003, which was when the Industry Group Indices were established and set at 100 points.

There are 8 Industry Group Indices and 25 Sectoral Indices

1.    Agro and Food Industry

1.    Agribusiness
2.    Food and Beverage

2.    Consumer Products

1.    Fashion
2.    Home and Office Products
3.    Personal Products and Pharmaceuticals

3.    Financials

1.    Banking
2.    Finance and Securities
3.    Insurance

4.    Industrials

1.    Automotive
2.    Industrial Materials & Machinery
3.    Packaging
4.    Paper & Printing Materials
5.    Petrochemicals & Chemicals

5.    Property and Construction

1.    Construction Materials
2.    Property Development

6.    Resources

1.    Energy & Utilities
2.    Mining

7.    Services

1.    Commerce
2.    Health Care Services
3.    Media & Publishing
4.    Professional Services
5.    Tourism and Leisure
6.    Transportation & Logistics

8.    Technology

1.    Electronic Components
2.    Information and Communication Technology

Official Website:  The Stock Exchange of Thailand