Thailand's biggest fund firm is planning to trade equities beyond its home market for the first time, starting with other Southeast Asian markets, and has added resources to cope with an expected increased in volume.
Having set up the dealing team 23 years ago with three traders for stocks and four for fixed income, Kasikorn Asset Management recently hired its fourth equity dealer.
One driver of the move is increased volumes generally, after Kasikorn AM – the country's biggest fund house – hit Bt1 trillion ($30.75 billion) in assets under management in March. Total equity trading volume last year was Bt390 billion, not far short of double the Bt222 billion figure for 2012.
Moreover, closer integration of Asean markets is slated for next year under the Asean Economic Community (AEC). Kasikorn AM anticipates greater overall trading volumes as a result , said Teerapong Sawejtraporn, head of equity dealing.
One significant development on this front was the establishment of the Asean Trading Link in September 2012. It allows cross-border placement of orders by brokers on six Southeast Asian bourses (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam).
Kasikorn AM is hoping to trade stocks directly in other Asean countries possibly next year, but he declined to be more specific on timing. It would start with Indonesia, Malaysia and the Philippines, before moving on to markets such as Cambodia, Laos, Myanmar and Vietnam.
The firm currently obtains its overseas exposure via exchange-traded funds and funds of funds, which it trades on bourses in China, Hong Kong, Singapore, London, New York, Tokyo and elsewhere.
Sawejtraporn is likely to increase the number of relationships his team has with brokers as it trades more offshore securities. It currently uses around 15 counterparties regularly for Thai equities and seven for non-domestic markets.
Another change it is considering is making use of trading algorithms as it internationalises its platform. Sawejtraporn’s team does not use algos right now, due to the big gap in spreads for each stock. But it may do so in the future, although he declined to give a likely time frame.
He conducted a test using a volume-weighted average price (VWAP) algo earlier this year and found it did not work well for the Thai stock market, as it resulted in a worse outcome than manual dealing. One issue is that algos require monitoring, and Kasikorn AM doesn’t have the resources to do that now, but it may put them in place in the coming year.
Other asset managers in Southeast Asia are also moving to boost their international reach and exposure as the AEC looms, and following the release of the Asean fund passport framework. Malaysia's Affin Hwang Asset Management is one example, as reported in the lead story on AsianInvestor's website today.