Own foreign or local shares at SET?
Thaistocks.com always recommends to own either Foreign (F) or NVDR (R) shares.
If you are a foreigner to Thailand you can still own either the foreign shares (F), local shares (L) or so called NVDR's (R) through most Thai brokers.
The "local board" is the main SET trading area. The SET index benchmark level you see quoted and all the stock prices are for the local shares. Only a few foreign shares sell for premiums on the so called "foreign board". Does this concern foreign individual investors? Which shares should you own, the foreign (F) or NVDR (R) shares?
Here is what we would do, call your Thai broker and ask about the market price of a certain stock you are considering for long term investment. Then simply ask, ï¿½Are there any (F) shares still available on this particular stock?". The broker will check and reply yes or no. This has nothing to do with the foreign board. The broker is simply checking if the pre-determined foreign ownership limit on this stock is already filled. While foreign institutions are restricted to buying and selling only the foreign shares; foreign individual investors on the other hand can chose either. This is yet another advantage to individuals. But some caution is advised.
Converting Local to Foreign shares
Once you have confirmation on the purchase of (L) shares you should instruct your broker to convert these to (F) shares right away; this can be done as long as the foreign limit is not reached. On your monthly Thai broker statement you can see your foreign shares, as they will have an (F) indicated right next to them. Currently many good shares in Thailand are available for (F) registration, as the market has been bearish for so long before turning recently bullish.
Finally, remember that (F) shares can always be sold on the local board (L) so there is never a risk at all in converting your Thai stocks into (F) shares. Just tell your broker these are (F) shares when you give them the sell order.
As the SET market heats up the foreign limit on popular Thai shares often gets filled quickly. This is because most all SET shares have a pre-set maximum limit on foreign ownership. In past bull markets foreign institutions paid at times hefty premiums for Thai (F) shares. However this will be less the case in the future due to the simple alternative in foreigners owing NVDR shares; as these do deliver all shareholder benefits – except to vote at the annual meeting.
For non-Thai investors, Thaistocks.com always recommends to register Thai shares you hold for investment into your own foreign (F) name or if not, then only hold the NVDR shares. Foreigners should not hold on to the local (L) shares as they would miss out on any dividends and other shareholder benefits or sweeteners.
There is some inconvenience in holding the (F) shares. When you buy and sell them you may have to sign a paper and give a copy of your passport, every time. More active foreign investors who don't care about the voting rights and want the least inconvenience should only buy and sell only the NVDR shares (R). NVDR stands for Non-voting depository shares, and they promise all shareholder rights except the right to vote.
Individuals have many other potential advantages when investing on the SET similar to the one referred above. Another clear advantage is the fact that Thai brokers only cover/research some 100 stocks here, yet there are some 400 companies listed on the local exchange. The potential exists for the discovery of finding real "jewels" -totally uncovered by local or international brokers. For years the mission of Thaistocks.com has been to find these and point them out to our members. I can tell you it has been a fruitful road to new wealth generation.
Noon, August 27, 2003
Article exclusive for Thaivisa.com