28-11-2023 (BANGKOK) In a significant announcement during an event in Bangkok on Nov 27, SGX (Singapore Exchange) CEO Loh Boon Chye disclosed plans for the expansion of the Singapore-Thailand Depositary Receipt (DR) Linkage, anticipated to occur in 2024. This development marks a pivotal move towards greater integration among Southeast Asia’s stock markets.
The concept of SDRs (Depositary Receipts) serves as a financial mechanism enabling investors to engage in foreign stock trading within their domestic stock exchanges.
The collaborative DR initiative between SGX and SET (Stock Exchange of Thailand) was initiated in 2021, representing the first-of-its-kind venture in Southeast Asia. Notably, on May 30, 2023, three major Thai stocks—Airports of Thailand, CP All (operator of 7-11), and PTT Exploration and Production (oil and gas giant)—commenced trading on SGX through the DR linkage. Subsequently, Singapore Airlines made its debut on the Thai stock market in September 2023.
SET President Pakorn Peetathawatchai highlighted this collaboration as the inaugural milestone towards achieving a more interconnected and accessible Asian exchange market. The overarching objective is to facilitate seamless Asean stock trading via DRs across the entire region.
CEO Loh Boon Chye expressed satisfaction with the reception of the three Thai DRs among retail investors in Singapore. Over the six months since the May launch, the number of investors participating in Thai DRs doubled. Loh emphasized the similarity in spreads and prices of these DRs to those on SET, ensuring a familiar and secure investment environment for Singaporean investors.
While anticipating further inclusion of Singapore stocks on the SET, Loh clarified that such stocks would continue to be under SGX’s supervision. He stated, “Even though it is a DR, the underlying stock is still traded on the SGX platform, which means it is under our surveillance.”
Addressing recent concerns, SET has faced allegations of overlooking “naked short selling,” a practice involving short selling without borrowing the stock. Dr. Pakorn asserted that the exchange had investigated several alleged cases but had yet to find concrete evidence of such practices.
While the Singapore-Thailand DR Linkage stands as the first initiative of its kind between two Asian bourses, SET currently has 18 DRs with underlying securities listed on SGX, Hong Kong Exchanges and Clearing Limited, Ho Chi Minh Stock Exchange in Vietnam, and Euronext. Additionally, there are five fractional depository receipts (DRx).
SET’s news release revealed that the total market capitalization of DRs and DRx at the end of the third quarter of 2023 reached 17 billion baht ($647.8 million), reflecting a 28% increase from the same period last year.
SGX, not limited to Southeast Asia, has been extending its product offerings to other global exchanges. Loh Boon Chye announced plans to list ETFs (exchange-traded funds) on both the Singapore and Shanghai stock exchanges. SGX has also entered collaborations with the New Zealand and Shenzhen stock markets.
In his address at the event, Loh expressed optimism about the future of Southeast Asian economies and their stock exchanges. He emphasized the collaborative efforts between Singapore and Thailand as paving the way for enhanced exchange cooperation in the region. Loh stated, “With exchanges working together, we can draw more investments into ASEAN, which is set to become the world’s fourth-largest economy in 2030.” Investors in Singapore are recognizing Thailand’s growth potential, supported by a vast domestic consumer market and industries advancing up the value chain.
