Asean Linkage folds after falling short
Complications and costs put investors off
Asean Linkage will be terminated this month as the trading system structured by regional bourses has not served investor needs.
Asean Linkage is a collaboration between seven stock exchanges in Southeast Asia comprising Malaysia, Vietnam (exchanges in Hanoi and Ho Chi Minh City each), Indonesia, the Philippines, Thailand and Singapore. The platform was intended to promote the growth of Asean capital markets by bringing more Asean investment opportunities to a wider range of investors.
Asean Linkage has focused on largecap stocks in the bourses to attract global investors.
The Asean Trading Link was initially implemented between the Singapore Stock Exchange (SGX) and Bursa Malaysia (BMB) in 2012.
The Stock Exchange of Thailand (SET) later joined as the third exchange in the programme. Each exchange has upgraded its matching engine and infrastructure, including the trading link system.
The BMB, SET and SGX represent approximately two-thirds of US$2 trillion (66.1 trillion baht) in market capitalisation for the seven Asean exchanges.
But cooperation among the three exchanges has not been successful due to how trading execution has been done through securities firms associated with each exchange, said SET president Kesara Manchusree.
Many regional securities firms are not interested in joining the trading system structured by the exchanges due to incurred costs, a complicated trading process and differences in currency settlement for stock trading, therefore these securities firms have resorted to using their regional network to service offshore trading instead, said Mrs Kesara.
“A change in trading environment, including Thailand, where the Bank of Thailand has allowed individual Thais to invest in global stocks through local brokers, has made both brokers and investors take different approaches to offshore trading,” she said.
“The end of Asean Linkage will come this month for SGX and BMB, while the SET will close [its Asean Linkage trading platform] next month.”
Meanwhile, the SET yesterday signed a memorandum of understanding (MoU) with the Oslo Stock Exchange and Chittagong Stock Exchange to coordinate efforts on capital market development and business opportunities, including listing trading, products and service development, roadshows and information sharing.
Other products include depository receipts and exchange traded funds with Thai-Norwegian underlying assets.
The MoU signing took place at the 57th World Federation of Exchanges (WFE) annual meeting in Bangkok, which represents more than 200 market infrastructure providers, including exchanges and central counterparties (CCPs).
WFE chief executive Nandini Sukumar said the conference aims to remind the world of the value that exchanges and CCPs bring to the real economy.
Separately, the SET has offered seed capital for setting up the Capital Market Development Fund (CMDF), with 90% of annual net profit contributed to the CMDF, said Mrs Kesara.
The finalised figure cannot be disclosed yet as it awaits the Securities and Exchange Commission decision regarding the CMDF’s seed capital, while 90% of the SET’s annual net profit will be contributed after deducting annual operating expenses, she said.
SET director Prinn Panitchpakdi said the CMDF’s seed capital will not exceed 8 billion baht and the process is awaiting the SEC’s consideration.
The SET and the SEC will hold a joint meeting at the end of this month on this issue before sending a proposal over to the Finance Ministry, said Mr Prinn.