SET slump a boon for futures market : Daily turnover up sharply on

SET slump a boon for futures market : Daily turnover up sharply on.

TFEX NUNTAWUN POLKUAMDEE

The bearish equities market has proved a boon of sorts for the Thailand Futures Exchange, with daily turnover up to 3,000 to 4,000 contracts per day compared with 1,500 in December.

Interest in the TFEX's SET50 index futures has picked up sharply, both among investors seeking to hedge their positions in the main market and among speculators.

Analysts said with the Stock Exchange of Thailand expected to remain volatile over the next several months due to security fears and investor concerns over the Foreign Business Act amendments and the Dec 18 capital controls by the Bank of Thailand.

Tanavatt Bhanijkasen, an executive vice-president at KGI Securities, said investors would do well to consider the TFEX as an investment option in a bear market.

KGI Securities, the leading broker on the TFEX, projects the SET index possibly falling to 580 points over the next several weeks due to various negative factors.

''When the equity market is going to down, it is quite difficult to protect risk by short selling through the Stock Exchange of Thailand,'' Mr Tanavatt said.

''It's much easier to take a short position on the TFEX to manage one's risk as well as arbitrage between the two markets. It's a crisis situation now for the SET, but an opportunity for the TFEX.''

Investors can short-sell individual stocks through securities borrowing-and-lending services, where one borrows a stock from a local broker for a set fee and a pledge to return the security within a set period of time.

But selling a TFEX contract is significantly less cumbersome for many investors, resulting in a sharp increase in turnover and open interest on the market.

Mr Tanavatt said the average size of contracts for a KGI client was around 50 to 100 contracts per account, with most positions closed at the end of each day.

Kesara Manchusree, the TFEX president, agreed that turnover had increased in line with the growing volatility of the equities market.

''Investors now better understand how to invest in derivatives,'' she said.

Bangkok Post
Thursday January 11, 2007