One Asset to run ThailandÆs first ETF

The stock exchange selects the fund managerÆs international consortium to launch ThailandÆs first exchange-traded fund.
An international consortium led by One Asset Management has been selected by the Stock Exchange of Thailand (SET) to set up and launch ThailandÆs first exchange-traded fund (ETF). The ETF will officially be launched in the second quarter of 2007 and will track the SET50 index, comprised of ThailandÆs most liquid stocks.

Bangkok-based One Asset Management was selected from a group of rival fund houses that were asked to submit a request for proposal (RFP) by the SET and Thailand Securities Depository Company and take the lead in launching ThailandÆs first ETF. According to ThailandÆs bourse, the company was awarded the right to establish and manage the countryÆs first ETF due to a number of factors, which was likely influenced by the depth of the consortium.

ôThis ETF will be successful provided the consortium has a thorough
understanding about the product, a robust marketing plan and distribution network, liquidity enhancement capability, and the commitment to make it a success,ö says Sethaput Suthiwart-narueput, senior vice president at the SEC. ôThe consortium's comprehensive and detailed plan, together with their ability to handle a range of questions, demonstrates their capacity to make this a success.ö

Alongside One Asset Management, which holds the title of fund manager of the EFT, Samsung Investment Trust Management Company will act as fund advisor to the fund and draw on their experience in the Korean ETF market.

Within the consortium, KGI Securities (Thailand), also the major shareholder of OneAsset, will take on the role of the market maker for the ETF. Along with One Asset Management, KGI Securities will contribute THB 900 million ($27 million) of the estimated fund size of THB 1.9 billion ($57 million) when it lists on the SET.

Rounding out the consortium will be Bualuang Securities, Kim Eng Securities, Thanachart Securities and Citicorp Securities, which will all act as participating dealers for the ETF.

When combined, the consortium accounts for more than 20% of total trading volume on the SET. The consortium is by no means final either and will look to other brokerages to join the group as dealers once the open-ended fund has listed on the Thai exchange.

According to fund managers in Thailand, it is expected that the consortiumÆs target of 30-50% growth of assets within three years of listing is very attainable. The main driver for the growth in assets will likely come from the retail investor space, say fund managers, due to the ease in which ETFs can be traded and the familiarity many already have with the stocks in the SET50 index.

At the initial stages, the consortium expects that the ETF will have retail participation of 60-70%, but does anticipate that the involvement of institutional investors to increase over time.

But there are some concerns regarding the attractiveness of the ETF, especially given ThailandÆs recent move to enforce stringent currency controls on foreign investors. When the SET first floated the idea of an ETF on the exchange, it was assumed that many investors in the fact would in fact be foreign. Members of the consortium and representatives from the Securities and Exchange Commission (SEC) and the SET are presently asking the Bank of Thailand for an exemption for foreign investors of the ETF.

But other managers are confident that the product will be a hit regardless of capital controls. ôThe fact that the ETF presents a new investment option to retail investors will ensure that it will be popular, both with locals and foreign investors,ö says one Bangkok-based fund manager. ôThe concerns of the consortium are understandable but the fund will work.ö

For the ETF the next step will be to establish a task force, comprising of consortium members, the SEC and SET, to push projects related to the fund such as regulatory changes and systems developments.

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