ASEAN’s stock markets have joined forces to launch a new set of indices known as the ASEAN/FTSE, with 180 constituents aimed at drawing both local and global investors towards the economic bloc’s top companies and to increase their exposure to these markets. According to the World Bank, developing countries in the East Asia Pacific region will see stable economic growth this year.
The stock exchanges that make up the ASEAN/FTSE index are Singapore (SGX), Thailand (SET), Indonesia (IDX), Malaysia (KLSE), the Philippines (PSE), Ho Chi Minh (HOSE) and Hanoi (HNX), the latter two of which are reported to be considering merging.
The stocks that constitute this index must pass the rules that market capitalisation must not be less than US$100 million and they must have a trading turnover of not less than 0.5 per cent of tradable shares in the past 12 months. Overall, it is expected that East Asia will grow by 7.1 per cent this year, which will mean that the region is the fastest growing in the world. Although growth figures in China are set to slip to 7.6 per cent, other developing nations in the region are predicted to grow by 5 per cent.
The president of Thailand’s SET remarked that the new index will be a benchmark of how the thirty large and mid-cap companies will perform in each of the countries involved. At the end of 2012, the combined market capitalisation of ASEAN exchanges amounted to US$2 trillion and the new index will offer opportunities for additional investment products such as derivatives, exchange traded-funds and index-linked funds. For Thailand, the thirty largest market cap stocks will be listed on the new index.
Although Thailand will face far tougher global financial conditions and has higher levels of household debt, this year will see steady regional gains and a gradual pickup in exports to developed economies. Structural reforms in Myanmar have helped its economy to grow at 7.8 per cent but the Vietnamese economy is expected to grow modestly at 5.5 per cent this year. In Thailand, growth lost its impetus from lukewarm external demand from the West and a slowdown in China, which has affected its manufacturing sector and exports. Its economy has also been hampered by the political protests.
As was expected, the World Bank cut Thailand’s growth forecasts following months of political unrest as tourism receipts, public investment and investor confidence have all been affected by the political gridlock. As a result, Thailand’s benchmark interest rate was again recently cut to just two per cent. Also, over the longer term, Thailand needs to restart its public infrastructure projects and implement measures that revise its growth paradigm towards a higher productivity economy to remain competitive.
The move will help operational performances of ASEAN’s regional exchanges and provide a suitable platform for investors looking to buy into companies that comprise it. Singapore has the largest regional exchange in ASEAN due to its free trade and international currency, but this index is a positive step for domestic companies in Thailand looking to raise funds to expand into ASEAN and beyond the domestic market.