MSCI to claim China ADRs

The move by the MSCI index to include China’s American depositary receipts (ADRs) is expected to remove 24 billion baht from the Thai stock market soon after it takes effect, says Trinity Securities’ managing director, Wisit Ongpipatkul.

The MSCI will include 14 China ADRs — US-listed China stocks — in its indices on May 31.

Once the China ADRs are included in the MSCI Emerging Markets Index, the China weighting will rise to 25.6% from 24.6%, said Mr Wisit. The ADRs include giant players such as Alibaba, Baidu, Qihoo and Youku Tudou.

The move is estimated to encourage institutional investment of $35.6 billion in the ADRs. The weighting of Thai stocks in MSCI Emerging Markets will decrease proportionally.

“We expect around 24 billion baht will flow out of the Thai stock market as a result,” he said.

The MSCI plans to gradually increase China A-Shares to raise its China weighting to 5-10% of total free float. Once the increase in China A-Shares is finished in MSCI Emerging Markets by 2021, China’s weighting will reach 43.6% while Thailand’s will dip to 1.18% from 2.18%.

The MSCI also plans to move South Korea and Taiwan stocks from the MSCI Emerging Markets Index to the MSCI Developed Markets Index over the next few years.

Mr Wisit forecasts the SET will be volatile this year, moving in a range between 1,200 to 1,530 points. He said the major risks are the US interest rate, the oil price and emerging market fluctuations.

Trinity projects earnings per share of listed companies in 2016 to average 94 baht, leading to a return on the SET index of 12.38%.

The company is focused on raising its high-net-worth clients to 480 from 400 accounts, increasing assets under management to 3 billion baht from 2.3 billion and margin loans from 3 billion from 2.4 billion, said president Charnchai Kongthongluck.

He said Trinity diversified into investment banking and asset management. It tallied net profit of 146.1 million baht last year, down from 191.7 million in 2014.