ASEAN link lures retail investors to boost trade

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The Malaysian and Singaporean stock exchanges are seeking to attract individual investors and bolster volumes by offering cross-border trading, the first step in creating a Southeast Asian platform.

Singapore Exchange Ltd. and Bursa Malaysia Bhd. start offering the services Tuesday, while the Stock Exchange of Thailand is poised to join the link-up between the Association of Southeast Asian Nations (ASEAN) members next month. The three account for 67 percent of the total market capitalization of the ASEAN Exchanges group, which includes Indonesia, the Philippines and Vietnam's two stock exchanges.

The trading platform is part of a push by ASEAN Exchanges to bolster regional capital markets and lure more investors to stock markets whose companies had a combined market value of US$1.98 trillion at the end of March, according to the group's website. Japan and Hong Kong's equity markets were valued at $3.79 trillion and $3.11 trillion at the time.

"We are now creating more investment opportunities across this region and it will spur liquidity," Tajuddin Atan, chief executive officer of Bursa Malaysia, said in a September 14 interview. "We will now embark on education, marketing and promotion at the ASEAN level. It will take a little bit of time for traction."

The combined average daily value of stocks traded in Malaysia, Singapore and Thailand this year is $2.5 billion.

No cost saving

Individual investors will be able to access stocks outside their home exchange through a local brokerage that is able to connect with a counterpart on the ASEAN exchange where they wish to trade. The broker-to-broker link is to ensure that the transaction follows local regulations, according to a September 6 statement from the Singapore Exchange.

Stock trades through the new link will be cleared and settled in the country where they are listed, not in the one where they are purchased. That means there aren't any cost savings for international firms that can already trade in the individual countries, according to Jessica Morrison, Deutsche Bank AG's Hong Kong-based head of Asia Pacific market structure.

"The ASEAN link would get much more interesting for the international firms if the top regional hot stocks could be traded on a single platform with one process for clearing and settlement," Morrison said September 6. "That is when the cost of capital, the ticket costs involved in settlement, and the currency risk could be reduced."

ASEAN Exchanges will next work together to enhance the clearing, settlement and depository processes in order to lower costs, Singapore Exchange Chief Executive Officer Magnus Bocker said Tuesday.

Markets such as Indonesia, Vietnam and the Philippines "need to have the readiness" before joining the ASEAN link, Bocker said. There is no deadline for them to join, he said.

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