Today (May 9), The Stock Exchange of Thailand (SET) and a consortium led by TMB Asset Management (TMBAM) signed a memorandum of understanding to establish equity ETF based on the Energy Sector Index by July 2008.
TMBAM’s team consists of Phatra Securities PCL (PHATRA) as market maker, and Capital Nomura Securities PCL (CNS) and TISCO Securities Co., Ltd. (TISCO) as participating dealers, SET President Patareeya Benjapolchai said.
“This ETF will be our first based on a sector index and widens the variety of investment tools available on the market. As energy stocks are highly liquid and attractive to investors, this new product is expected to appeal to locals and foreigners, and hence increase market competitiveness,” Ms. Patareeya said.
The TMBAM consortium will provide educational and marketing support for the instrument. As of May 8, 2008, the energy sector recorded a market capitalization of 35%, making it the largest contributor to SET’s total capitalization, SET Senior Vice President and Equity ETF Working Committee Chairman Supakit Jirapraditkul said.
The energy sector index ETF will have an initial value of no less than THB 500 million, with the Exchange investing THB 30 million as seed money. It will be focusing on about 10 energy stocks with high liquidity and market capitalization, such as BANPU, EGCO, ESSO, GLOW, IRPC, PTT, PTTAR, PTTEP, RATCH, and TOP, which collectively represent about 97% of the energy sector index. The fund will be quoted in real-time and prices will be in line with its sector index. TMBAM will conduct local and overseas roadshows and is confident that the product will be well-received by investors, TMBAM Managing Director Chotika Sawananon said.
PHATRA will support the growth of equity ETF based on the energy sector index through its strong local and foreign client bases. The firm is confident in the future of the energy sector. Providing trading liquidity will ensure that the product trades at a price close its net asset value. Its bids and offers will be no less than 200,000 units and have no less than a 1% price difference, PHATRA Managing Director and Head of Equity Sales and Trading Patchanee Limapichat added.
The popular equity ETF on SET50 Index is another interesting investment alternative. That ETF is already available in Japan and the new sector index ETF should be very welcome also, CNS Executive Board Chairman Suthep Peetakanont said.
This product marks another step in the market’s development. As a participating dealer, TISCO is confident that the company’s staff and clients will promote this instrument and any other innovations, TISCO Managing Director Paiboon Nalinthrangkurn noted.
Equity ETFs suit those who prefer investing at a lower risk than direct stock investment. The brokerage fee is only 0.1% of trading value. To invest in ETFs, investors can simply send their orders to brokerage firms in the normal way.