Thais' trading of depositary receipts (DRs) has doubled in value this year, as an underwhelming domestic bourse led local investors to increase their investment in foreign stocks, says the Stock Exchange of Thailand (SET).
The average daily trading value of DRs, an instrument that lets investors gain exposure in foreign securities, doubled year-on-year to roughly 560 million baht as of May 19. The total market capitalisation of DRs has grown by 25% during the period to 36 billion baht.
Rinjai Chakornpipat, senior executive vice-president at the SET, said investor demand for DRs is fuelled by a growing appetite for portfolio diversification and risk mitigation.
"DRs have become a convenient tool for Thai investors to access global equities, while managing forex risk through local brokers," she said.
The growth in DRs is being supported on both the demand and supply sides. As of May, 16 new DRs were listed on the SET this year, with Kiatnakin Phatra Securities (KKPS) issuing 10 and another 6 by Yuanta Securities (Thailand).
The new issuances brought the total number of DRs traded on the Thai bourse to 118, covering major global equities and exchange-traded funds (ETFs) across Asia, the US and Europe.
The SET recently approved extension trading for DRs linked to US and European stocks, effective on May 6, allowing Thai investors to trade DRs during both local daytime and overseas trading hours, helping reduce time zone mismatches and responding promptly to global market movements, said Ms Rinjai.
Nopadon Nimmanpitak, managing director at KKPS, said investor interest in foreign securities has grown significantly since 2020, thanks to easier access to global financial information and the appeal of high-growth, innovation-driven companies that are not listed on the Thai market.
Philip Julian Magnus Finch, managing director and team head of equity solutions at KKPS, said global investment sentiment may improve in the second half if tensions ease thanks to US trade deals.
Deregulatory policies in the United States, especially in finance, banking and energy, as well as streamlined merger and acquisition regulations, could lead to a wave of initial public offerings in these sectors, said Mr Finch.
However, these measures have raised concerns about US public debt. US bond yields have risen while the dollar weakened, both of which have implications for global asset allocation, he said.
Despite these mixed signals, US economic growth is expected to remain resilient, with no recession anticipated. Analysts expect the S&P 500 to end the year at around 6,100 points, offering a modest upside. Against this backdrop, KKPS curated a list of 10 leading global companies accessible through its latest DR offerings launched on Thursday.