Daily block trades jump to B6bn
The volume of block trades has doubled over the past two years on lower trading fees and highly leveraged returns. These transactions involve a large quantity of derivatives on the Thailand Futures Exchange (TFEX) changing hands at an arranged price, according to Bualuang Securities.
Daily transaction value ranges from 5 billion to 6 billion baht a day, up from 2 billion to 3 billion baht two years ago, said Chaiyaporn Nompitakcharoen, executive vice-president of Bualuang Securities.
Block trades occur between two parties but are only available to big players or highnet-worth investors with a minimum credit line of 3 million baht.
Trad i ng fees have also helped boost volume as they are 70-75% cheaper than the fees charged when trading stocks, Mr Chaiyaporn said. TFEX contracts also tend to be cheaper than shares on the Stock Exchange of Thailand (SET), he added.
As another incentive, investors in the TFEX can take either long or short positions.
Block trades are a popular instrument for single stock futures as they offer the prospect of tantalising returns while low investment mitigates risk.
Say you want to buy XYZ common shares on the SET at 100 baht a share. Instead, you could invest 10% of that share price by taking a long position on XYZ futures contracts on the TFEX.
Given that futures contracts move in the same direction as the underlying share on the SET, investors can enjoy handsome returns if the bet pays off.
Prop r ietary trading by brokers now accounts for 10-20% of daily block trade volume and this is likely to rise further, he said.
Mean w hile, Bualuang Securities is maintaining its SET index target of 1,627 points this year as it remains upbeat on consumer and leasing companies.
It advises selectively buying retail stocks such as Beauty Community Plc (BEAUTY), which is tipped to see net profit jump 40% in Q2 in annualised terms.
It holds a buy position on both Sawad Power 1979 Plc (SAWAD) and Muangthai Leas i ng Plc (MLTS) on expectations of higher earnings.