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Dec 12, 2019

The 2010s in review: Thai IR has come a long way

A look back at the challenges faced by Thai issuers over the last 10 years

The decade has been good for Thai investor relations professionals – and there have been some interesting changes. At the beginning of the decade, my company, Indorama Ventures, listed on the Stock Exchange of Thailand (SET) just in time for a heady lift-off as the SET soared to a 14-year high by October 2010. Shareholders were on a roll and life was relatively busy for IR officers: people were, in effect, buying Thai stocks because others were buying them.

Back in 2004, the government had introduced long-term funds (LTFs) to the Thai market and these proved popular with investors, which could deduct 15 percent of taxable income, making them a good option for retirement savings, similar to the 401k in the US. 

This change proved critical for IR and continued to have a significant impact on the profession during the 2010s. LTF fund managers demanded attention from Thai IROs, who shifted into higher gear. Those IROs now became an important part of companies’ corporate image-building and their marketing strategy, competing to persuade potential investors to ‘choose me!’ over others. 

‘Companies significantly raised their awareness and put much more effort and resources into the IR function,’ says Suwat Sinsadok, a well-known analyst in the Thai market. ‘They believed it was a critical connection between what companies were doing and what investors perceived. The better those links, the higher the valuations.’ 

The importance of IR to investor communications was supported by a Thomson Reuters Extel white paper, released in 2012, which pointed out that the top 10 European companies with best shareholder communications had outperformed the market by 28.8 percent since 2007. Thai IROs packed their bags and went abroad more frequently, seeking investor interest.

We saw with concern, however, that a global systematic change was occurring. Nasdaq executive vice president Edward Knight noted in November 2015: ‘The evidence that the balance between long-term and short-term investing has been lost is growing.’ As was especially noticeable in Thailand, a broader number of listed companies were seeing investment by institutions and large investors that were evaluating those companies on their short-term performance. 

Companies themselves were increasingly providing more frequent earnings guidance and unfortunately playing an unwitting role in creating demand for short-term performance. 

For those of us working in Thailand, Suwat notes that staff at funds and brokers were rotating out more quickly – within two or three years – as the new millennial generation had become less patient and more dynamic with regard to job function. 

Brokers have now come to accept that the web has had an effect on their information services, with news abundant and freely accessible via the internet. Social media channels like Twitter and LinkedIn mean people can exchange information instantly, and about 80 percent of investors now use social media for a lot of their daily research. I remember a well-known Singapore investor telling me he would read all the news, both on paper and online, from around 6.00 am until the market opened to get breaking news on stocks and gain insight into current and potential investments. 

When the Bangkok Stock Exchange was set up in 1962, it was the telephone that helped create high-frequency trading (HFT). In the 2010s we saw this short-term approach evolve with the rapid growth of computerized HFT. Institutional investors were able to trade in fractions of a second and, for some IROs, relationships were subsumed by the mighty algorithm. 

Over the past decade, investment in what are perceived to be sustainable companies has risen in importance. Fund managers like RobecoSAM have created benchmarks for measuring ESG reporting because investors understand that the more sustainable the company, the more it outperforms the index. Thailand now has 20 companies listed in the Dow Jones Sustainability Indices. Exchanges everywhere are rushing to set up green indices and benchmarks to attract ESG investors and it certainly looks like they are growing in importance.

Institutional investors like Putnam and Vanguard, among a host of others, have ESG funds for so-called green investors and are now leading the talk on which companies may attract capital. Asian institutions made significant steps toward ESG reporting, with the National Pension Service of South Korea, Taiwan’s Bureau of Labor Funds, the Hong Kong Monetary Authority and AIA Insurance Group committing to more green investment. IROs are automatically putting slides in their presentation deck to show their green credentials.

The end of the decade marks the start of a new era and we will see more use of electronic communication as information will continue to travel at the speed of light. ESG reporting in the (electronic) annual report will grow in importance and we might find the combination of online trading and electronic communications conjoined with green investments leading to less emphasis on live face-to-face meetings and a decline in air travel. The Asian IRO has more challenges to come.

Richard Jones is senior vice president at Indorama Ventures