As scheduled, Thailand joined Singapore and Malaysia on the Asean Trading Link last week. Going by news coverage and a couple of conversations I’ve had, Thai investors and brokers seem to be more enthusiastic about the project than anybody else.
That’s understandable – the historical ties between Malaysia and Singapore mean that anybody from one country who was keen to invest in the other could do so fairly easily and at reasonably low cost. But while there are brokers in Thailand who can already access other Asian markets, the link promises to make it a bit easier and cheaper for local investors there to invest in neighbouring countries – and, going the other way, also hopefully increase interest from foreign investors in Thai stocks.
The immediate impact for investors outside these three countries is likely to be limited. The obvious stock brokers for trading regional markets – eg OCBC Securities, Phillip Securities, Boom Securities – can already access all three markets and many more, so this makes no difference to reach.
Some may make use of the new link rather than their existing trading arrangements for some markets, but it’s not clear that this will have much impact on commissions. The table below shows current trading commissions for three of the major brokers in Singapore, which seem to be staying at pre-link levels for now (Phillip Securities and Maybank Kim Eng have signed up for the link, OCBC Securities so far has not)
Maybank Kim Eng (SG) OCBC Securities (SG) Phillip Securities (SG)
Singapore Up to 0.275% (min S$25) Up to 0.275% (min S$25) Up to 0.28% (min S$25)
Malaysia Up to 0.5% (min MYR60) Up to 0.5% (min MYR70) 0.5% (min MYR60)
Thailand 0.5% (min THB500) 0.5% (min THB500) 0.5% (min THB500)
It’s possible that brokers in other countries who already offer Singapore stocks through relationships with Singapore brokers may now easily be able to offer Malaysia and Thailand as well, but we’ve yet to see any firms actively promoting this new opportunity.
However, the link may become more interesting in the next few years. First, Indonesia, the Philippines and Vietnam are supposed to be joining, although the exact time frame is uncertain – theoretically, Indonesia and the Philippines are supposed to join in 2013 and Vietnam in 2014.
But of the three, Vietnamese officials have been sounding most committed in recent announcements (unsurprising given that the poorly performing Vietnamese market could certainly do with more foreign participation). The Philippines has said that it wants to upgrade its trading systems first, while officials in Indonesia – flush with foreign capital at present – often sound relatively laid back about whether they join or not.
Second, the exchanges may be able to move on from providing a trade interface to other issues, such as better integration of clearing and settlement and better liquidity for exchanging regional currencies, which would probably do more to reduce frictions and trading costs than the link will in its current form.
Asiamoney has a feature looking at many of these issues, which may or may not disappear behind a paywall at some point, as does AsiaEtrading.