The SET, or Stock Exchange of Thailand, is situated in Bangkok and serves as the country’s primary stock exchange. Its indices include the SET Index, SET50 Index, and SET100 Index.
History of the Stock Exchange of Thailand
Discover the history of Thailand’s modern Capital Market, which can be traced back to the early 1960s. The country implemented its inaugural five-year National Economic and Social Development Plan in 1961 to boost economic growth and stability, while also improving the Kingdom’s standard of living.
The Second National Economic and Social Development Plan (1967-1971) recommended creating a well-regulated securities market to gather more capital for national economic advancement.
The evolution of the Thai capital market can be classified into two significant phases. It commenced with the privately-owned “The Bangkok Stock Exchange” and was followed by the establishment of “The Securities Exchange of Thailand.”
Formation of the Bangkok Stock Exchange
A private group established an organized stock exchange in July 1962, which later became a limited company called the “Bangkok Stock Exchange Co., Ltd.” (BSE) in 1963.
However, the BSE was not very active, with a turnover value of only 160 million Baht in 1968 and 114 million Baht in 1969. Trading volumes continued to decrease sharply in subsequent years. Although the turnover in debentures reached 87 million Baht in 1972, stocks continued to perform poorly, leading to the closure of the BSE in the early 1970s.
Experts believe that the BSE failed to succeed because the government did not provide sufficient support and investors lacked an understanding of the equity market.
Establishment of the Stock Exchange of Thailand
The concept of an orderly, officially supported securities market in Thailand gained considerable attention despite the failure of the BSE.
In 1967-1971, the Second National Economic and Social Development Plan proposed a plan for the establishment of such a market, with appropriate facilities and procedures for securities trading.
In 1969, the government acquired the services of Professor Sidney M. Robbins from Columbia University to study the development channels of the Thai capital market as recommended by the World Bank. The Bank of Thailand also formed a Working Group on Capital Market Development in the same year to establish the stock market. In 1970, Professor Robbins produced a comprehensive report entitled “A Capital Market in Thailand,” which became the master plan for the future development of the Thai capital market.
The government amended the “Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings Affecting Public Safety and Welfare” in 1972 to extend government control and regulation over the operations of finance and securities companies. In May 1974, long-awaited legislation was enacted to establish “The Securities Exchange of Thailand” (SET), followed by revisions to the Revenue Code at the end of the year, allowing the investment of savings in the capital market.
By 1975, “The Securities Exchange of Thailand” officially started trading after the necessary legislative framework was in place. On January 1, 1991, the Thai government formally changed the name to “The Stock Exchange of Thailand” (SET).
Roles of the Stock Exchange of Thailand
The SET has two primary functions: It serves as a center that trades listed securities and provides necessary systems for facilitating securities trading.
It also conducts other businesses related to the Securities Exchange, such as serving as a clearinghouse, securities depository center, securities registrar, or similar activities, and it can conduct any other business that the SEC approves.
Operations of the Stock Exchange of Thailand
The Securities Exchange of Thailand Act, B.E. 2517 (1974) established the Stock Exchange of Thailand as a juristic entity. On April 30, 1975, it commenced operations.
The Stock Exchange of Thailand’s primary objective is to function as a market or center for trading listed securities, promoting financial planning and providing relevant services without distributing any profits to its members.
The Stock Exchange of Thailand encourages the general public to become shareholders in a variety of local industries. The Stock Exchange of Thailand functions under the legal framework laid down in the Securities and Exchange Act, B.E. 2535 (1992).
The principal operations of the Stock Exchange of Thailand include securities listing, supervision of listed companies, and information disclosure, trading, market surveillance, member supervision, information dissemination, and investor education.
Stock Exchange of Thailand Trading System
In this section, we cover the SET’s trading facilities, provide information on trading rules, and offer insights into Internet trading.
Fully Computerized Trading System
Since April 1991, the “Automated System for the Stock Exchange of Thailand” (ASSET) has facilitated fully computerized trading on the SET, ensuring efficient, equitable, and fluid trading. This system offers two main selling methods, namely Automatic Order Matching (AOM) and Put-Through transactions (PT).
Two Trading Methods
1. Automatic Order Matching (AOM) Trading
AOM trading performs the order matching process according to price, the time, priority, without human intervention. After brokerage houses electronically send buy or sell orders from their offices to the SET mainframe computer, the ASSET system queues the requests and arranges them according to a price-then-time priority. Price-then-time priority means prices sequences orders, with the best price taking precedence. Then, within each price group, orders are arranged according to time. Regarding the matching process, there are two methods: continuous order matching and call market method. Continuous Order Matching procedures operate during the regular trading sessions. The ASSET continuously matches the first buy and sell orders in the queue, and at the same time, confirms each executed transaction via the member’s (broker’s) terminal.
The Call market matching is utilized in calculating the opening and closing prices of security at the opening and closing of the trading hours. This method allows brokers to enter their orders to be queued for matching at a specified time at a single price that generates the greatest trading volumes for that particular stock. Automatic Order Matching (AOM) Trading
2. Put Through (PT) Trading
The ASSET allows brokers to advertise their buy or sell interests by announcing bid or offer prices, and members can deal directly with each other. Rates may be adjusted during negotiation, so the effective executed price may differ from the advertised price and may not follow price spread rules. After concluding negotiations, dealers must send details of the result(s) to the ASSET for recording purposes.
Thailand Stock Exchange Trading hours
The SET conducts trading activities on all bank business days, which usually span from Monday through Friday. Traders engage in two sessions each day, namely the morning session that runs from 10:00 to 12:30 and the afternoon session that runs from 14:30 to 16:30.
Usually, a ‘board lot’ – which is the standard trading unit – consists of 100 units of a security. However, if a stock has been priced at 500 Baht or more for six consecutive months, then each board lot is reduced to 50 units. This provision applies only to such stocks.
Floor and Ceiling Limits
The SET implemented new floor and ceiling price limits for trading on 1 December 1997. Previously, stock prices were permitted to vary within a 10 percent range, but the updated limits permit swings of up to 30 percent of the previous closing price on the main board. However, stocks trading at less than 1 baht can experience fluctuations of up to 100 percent of the previous closing price. These limits apply to all trading boards using the AOM system, except for the international board.
The SET implemented a circuit breaker system alongside the floor and ceiling trading limits to alleviate any market volatility that could cause investor panic.
This system operates in two stages. The first stage is triggered when the SET index drops by 10% from the previous day’s close, at which point all trading in listed securities must halt for 30 minutes.
The second stage is triggered when the SET index falls by another 10%, bringing the total drop to 20% from the previous day’s close, and trading in all listed securities must then halt for one hour.
If there is less than 30 minutes or one hour left in a trading session, respectively, when the circuit breaker is activated, trading must stop until the end of the session, at which point it will resume in the next session.
SET Industry Group Indices and Sectoral Indices
The SET Index, which is derived from the prices of all common stocks on the main board, is not the only index provided by The SET.
The SET also offers industry group indices and sectoral indices, both of which are calculated based on the prices of common stocks with similar fundamentals within their respective industry group or sector.
The calculation methodology for these indices is the same as that for the SET Index, which is a market capitalization weighted index. The calculations for the industry group and sectoral indices are adjusted to reflect the same factors that affect the SET Index, such as changes in stock allocation between sectors or industry groups. Additionally, the base date for the Industry Group Indices is December 31, 2003, when they were established and set at 100 points.
There are 8 Industry Group Indices and 25 Sectoral Indices
1. Agro and Food Industry
2. Food and Beverage
2. Consumer Products
2. Home and Office Products
3. Personal Products and Pharmaceuticals
2. Finance and Securities
2. Industrial Materials & Machinery
4. Paper & Printing Materials
5. Petrochemicals & Chemicals
5. Property and Construction
1. Construction Materials
2. Property Development
1. Energy & Utilities
2. Health Care Services
3. Media & Publishing
4. Professional Services
5. Tourism and Leisure
6. Transportation & Logistics
1. Electronic Components
2. Information and Communication Technology
The official website of the Stock Exchange of Thailand is here: SET