Ppt bmic edited 180813

Sorasart Sukcharoensin , PhD

Assistant Professor ,School of Development Economics

National Institute of Development Administration (NIDA)

Email: [email protected]

Wanida Jarungkitkul

Graduate Student in Financial Economics,School of Development Economics,

National Institute of Development Administration (NIDA)

The Assessment of the Stock Exchange of Thailand (SET)

Competitiveness in ASEAN : An Application of Porter’s Diamond Model

2nd Business Management International ConferenceBurapha Business School, Faculty of Management and Tourism, Burapha University, Thailand

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August 22-23, 2013

Introduction Objective Literature review Data and methodology Results Conclusions

The Assessment of the Stock Exchange of Thailand (SET) Competitiveness in ASEAN : An Application of Porter’s Diamond Model

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Areas of Discussion

ASEAN Exchanges linkage between seven stock markets from six countries

Thailand: The Stock Exchange of Thailand (SET)Malaysia: Bursa Malaysia (BM)

Indonesia: The Indonesia Stock Exchange (IDX)Philippine: The Philippine Stock Exchange (PSE).

Singapore: The Singapore Exchange (SGX)Vietnam: Ho Chi Min Stock Exchange (HOSE) and

Hanoi Stock Exchange (HNX)

ASEAN Exchange make the expediency for funding and investment in the region. There are 3,613 companies listed in seven stock markets. Total stock market value is 1,980.37 billion USD or fifth ranked in the world (World Federation of

Exchanges, 2012) Therefore, AEC and the integration of stock markets become more interesting in global investor’s perspective.

In 2009, ASEAN step forward to ASEAN Economic Community (AEC) for establishing market base and

working together to strengthen in the region.

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IntroductionThe Assessment of the Stock Exchange of Thailand (SET) Competitiveness in ASEAN : An Application of Porter’s Diamond Model

Introduction

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IntroductionThe Assessment of the Stock Exchange of Thailand (SET) Competitiveness in ASEAN : An Application of Porter’s Diamond Model

Introduction

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Objectives


In this study, we explore the competitiveness of Thai Stock Market

among 5 nations. That is one of Thailand's capital market reforms in the capital

market development plan 2012 to dismiss the monopolies and raise the

competitiveness of the Thai Stock Market. The result of this investigation will

mark (rank) a competitive position of Thailand stock exchange among ASEAN 5

and identify the way to improve its competitive position.

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Literature review


Diamond Model is the competitive advantage framework for countries, sectors, and firm levels. The model is created from the theoretical underpinnings of this interplay of country competitiveness topics such as “productivity” (Porter, 1990) The Firm’s

strategy structure and

rivalry

The Firm’s strategy

structure and rivalry

The Related-supplier

Industries

The Related-supplier

Industries

Factor Conditions

Factor Conditions

Demand ConditionsDemand

Conditions

Chance

Role of Government

Diamond Model (1990)

The Competitiveness of Thai Stock Market among ASEAN 5 NationsThe Competitiveness of Thai Stock Market among ASEAN 5 Nations

The Competitiveness of Thai Stock Market among ASEAN 5 Nations

Data The macroeconomics factors are synthesized from the Global Competitiveness Report in the year 2012 presented by World Economic Forum (WEF ) and International Institute for Management Development (IMD) Stock market information, we collect from the stock market database of each country, the World Federation of Exchanges database, and DataStream database between 2 007-2012.

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The Assessment of the SET Competitiveness in ASEAN: An Application of Porter’s Diamond Model

Data and methodology


MethodologyRanking the competitiveness :CA,I = (ValueA,i – MinA)

(MaxA – MinA)/10

CA, i = Relative value of factor A for Stock Market iValueA, i = Numeric value of factor A for Stock Market i.MinA (Minimum) = minimum value of factor A in all Stock

Market.MaxA (Maximum) = minimum value of factor A in all Stock

Market.10 = Graph Scale full points to compare among Stock Market. i = SGX, SET, BM, PSE, IDX

Cmkt cap,SET

(549.25 – 132.16)/10

Max = SGX = 10Min = PSE = 0SET = 3.10

3.1 = (262.5 – 132.16


DescriptionScore (1-10)

SGX SET BM PSE IDX1 Factor Conditions

1.1 Basic FactorInfrastructure- Quality of overall infrastructure 10.0 4.5 6.2 0.0 0.3-Investment in telecommunications (% of GDP)

3.9 4.7 10.0 0.0 5.2

- Connectivity of people and firms 10.0 1.0 6.6 4.5 0.0- Technological cooperation 10.0 1.3 8.9 0.9 0.0

1.2 Advanced factorsDeepening Financial Systems-Financial Depth (Market Size as a % of GDP)

10.0 8.3 8.9 0.0 3.4

- Availability of financial services 10.0 2.3 6.2 1.5 0.0- Affordability of financial services 10.0 2.9 7.1 2.9 0.0- Ease of access to loans 10.0 3.1 8.1 0.0 5.0- Soundness of banks 10.0 5.3 5.8 5.8 0.0- Euro money country risk 10.0 2.1 3.7 0.0 1.2- Financial risk factor 8.9 7.4 10.0 7.8 0.0Quality of labor - Finance skills 10.0 3.2 8.9 7.9 0.0- Information technology skills 10.0 1.3 8.9 0.9 0.0- Language skills 10.0 0.0 8.8 8.5 2.6- Quality of management schools 10.0 0.7 5.3 3.3 0.0- Remuneration in services professions ($) 10.0 5.6 3.1 0.0 0.9- Brain drain 10.0 3.0 5.7 0.0 2.6- Capacity for innovation 8.8 0.6 10.0 0.0 5.9- Company spending on R&D 10.0 0.0 8.0 0.5 4.0

Mean Score (4.7) 9.16 2.96 7.57 1.98 1.54Rank 1 3 2 4 5

I. Factor Conditions

SET had many strengths such as

financial depth (market size as a % of GDP),

financial risk factor, and remuneration in services

professions ($).

On the other hand, SET had many weaknesses

such as quality of overall infrastructure, language skills, company spending

on R&D, capacity for innovation, and quality

of management schools.

8


Results


Deepening Financial Systems, GCR 2012 (Ranking)

Source: World Bank, AsianBondsonline and World Economic Forum04/09/23 9


Results



DescriptionsScore (1-10)

SGX SET BM PSE IDX

2. Demand conditions

2.1 Size and growth of demand

- GDP growth (%) 0.0 3.1 4.8 4.8 10.0

- Market capitalization (billion USD) 10.0 3.1 5.1 0.0 3.6

- Market capitalization growth (%) 2.3 4.0 0.0 9.1 10.0

- Value of share trading (billion USD) 10.0 4.6 2.9 0.0 2.6

- Volume of share trading (‘000 shares) 2.4 5.7 0.0 0.5 10.0

- Value traded on stock markets (USD per capita) 10.0 0.5 0.5 0.0 0.0

- Turnover velocity (%) 5.6 10.0 2.0 0.0 3.3

2.2 Sophisticated demand

- Number of listed companies 7.5 4.1 10.0 0.0 2.4

- Product in market (stock, derivative and bond) 10.0 7.0 6.0 0.0 4.0

- Market concentrate (CR10) 10.0 0.0 7.1 0.7 0.7

- Herfindahl Index (HI) 1.1 6.7 10.0 7.8 0.0

Mean Score (4.4) 6.9 4.1 5.1 1.7 4.2

Rank 1 4 2 5 3

II. Demand Conditions

SET had strength in turnover velocity and average daily turnover which was highest in 5 nations. In addition, SET had products variable nearby the SGX and the BM. However, SET had many threats such as low stock traded per capita (SET had 3,233 US dollar per capita, but the SGX had 55,576 US

dollar per capita), and lacked of newly listed companies

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Results


Market capitalization 2007-2012 (Billion $US)

Daily value of share trading 2007-2012 (Million $US)

Turnover of Velocity 2012 (%)

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SETSGX

BM IDX PSE

Results




SGX SET BM PSE IDX- Ethical practices 10.0 1.8 6.4 2.4 0.0- Credibility of managers 10.0 4.9 7.0 4.6 0.0- Corporate boards 9.1 4.3 10.0 4.4 0.0- Auditing and accounting practices 10.0 3.0 7.1 3.1 0.0- Venture capital availability 10.0 1.2 7.6 0.0 5.3- Image abroad 10.0 5.6 6.9 0.0 3.2

Mean Score (4.9) 9.8 3.5 7.5 2.4 1.4Rank 1 3 2 4 5

III. Related and Supporting Industries SET was third ranked (CR, SET = 3.50). There has many

strengths such as image abroad, credibility of managers, and corporate boards. However, the SET has many

weakness such as venture capital availability, ethical practices, and auditing and accounting practices.

Therefore, it will be affected to develop firm for listing in stock market

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Results


Source: International Institute for Management Development

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SGX SET BM PSE IDX4. Firm Strategy, Structure and Rivalry

4.1Structure- Market Capitalization to GDP (%) 10.0 1.5 5.0 1.4 0.0- Financial sector liberalization 10.0 3.1 8.2 0.0 2.8- Trading participants 10.0 0.0 0.4 0.3 0.2- Corporate Governance (CG Watch Report) 10.0 6.6 5.6 1.3 0.0

4.2Rivalry- Market share in WFE 10.0 2.4 5.1 0.0 4.1Stability of Stock market- Stock Volatility 10.00 4.03 9.14 5.66 0.00- Stock Return 0.00 5.45 2.86 2.55 10.00- Skewness of market return index 10.00 7.99 0.00 5.21 7.20- Exchange rate Volatility 3.54 8.45 0.00 6.71 10.00Fundamental Finance - Price - Earnings ratio (P/E ratio) 9.6 10.0 3.5 0.0 1.4- Price to book ratio (P/B ratio) 10.0 7.9 7.3 7.0 0.0- Dividend Yield 3.7 10.0 5.9 0.0 0.5

Mean Score (4.7) 8.1 5.6 4.4 2.5 3.0Rank 1 2 3 5 4

IV. Firm Strategy, Structure and Rivalry The firm's strategy which was found that every country has a

standpoint in developing and making a strategy of different stock markets. Structure of Stock Market SET was smaller

than SGX and BM Thailand was become liberal market like Singapore

(Transition). Because of efficiency in banking system, equity market development and strong M&A activity (The Financial

Development Report, 2012).

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Results


Thailand raise up scores in corporate Governance (ASIA CG Report 2012)

CountryTotal

CG Rules&

Practices

Enforce

ment

Political &

Regulatory

IGAAPCG

Culture

1.Sinapore

69 68 64 73 87 54

2.Hong Kong

66 62 68 71 75 53

3.Thailand

58 62 44 54 80 50

4.Japan 55 45 57 52 70 534.Malaysi

a55 52 39 63 80 38

6.Taiwan 53 50 35 56 77 467.India 51 49 42 56 63 438.Korea 49 43 39 56 75 349.China 45 43 33 46 70 30

10.Philippines

41 35 25 44 73 29

11.Indonesia

37 35 22 33 62 33

Source: Asian Corporate Governance Association (2012)

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The SET was second ranked in ASEAN5 next to the SGX . The SET had strength in rules relating to the timeliness and

frequency of financial reporting, disclosure of director share transactions, disclosure of substantial ownership stakes (5% and above). Audit committees were mandatory. However, the

SET should be improving corruption a major issue.



Results



SGX SET BM PSE IDX5. Role of Government

5.1 Efficiency of Public Finance:-Public Finance 10.0 1.7 5.0 1.5 0.0-Fiscal Policy 10.0 0.3 0.8 0.6 0.0

5.2 Institution Framework 10.0 4.3 7.4 1.3 0.05.3 Government Regulation of Business:

- Burden of government regulation 10.0 1.5 6.2 0.0 2.7- No. procedures to start a

business 10.0 8.3 9.2 0.0 5.8- No. days to start a business 10.0 3.8 9.3 2.4 0.0- Efficiency of legal framework. 10.0 1.7 8.3 0.0 2.6- Shareholders' rights 10.0 0.0 7.3 1.8 0.9- Public trust in politicians 10.0 0.0 5.4 0.5 2.0Taxation- Corporation Income Tax 10.0 5.4 3.8 0.0 3.8- Dividend tax. 10.0 3.3 10.0 0.0 0.0- Value-added tax (VAT) 8.3 8.3 10.0 0.0 3.3

Mean Score (4.4) 9.8 3.5 6.6 0.6 1.6Rank 1 3 2 5 4

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Results


V. Role of Government The SET was third ranked (CG, SET = 3.50) ,There is many

threats such as shareholders' rights, public trust in politicians, and fiscal policy.

Total Scores SGX 8.76, BM 6.25 SET 3.92, IDX 2.36, PSE 1.8604/09/23 17


Results


The SGX was the highest stock market competitiveness among ASEAN5 whereas the PSE was the lowest ranked

and the SET was third ranked in terms of competitiveness.

The SET can outperform two ASEAN (IDX and PSE), but is defeated by the SGX and the

BM.

The SET had relatively performing lower than average ASEAN5 in four

factors: factor conditions, demand conditions, related

and supporting industries and role of government.

In order to raise competitive advantage of the SET, it is

necessary to improve weakness and promote strengths for building

competitive to aggressive position like SGX and BM. For instance, in the first step, it should improve related and

supporting industries. to impress its competitive advantage. (Raise up to Conservative Position)

Strategic Position among ASEAN5 Stock Market

High

High

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Conclusions


Question & Answer

Thank youThank you

The authors are thankful to the Thailand Research Fund (TRF) for research grant.

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References

Asian Development Bank. 2012. Going Regional: How to Deepen ASEAN’s Financial Markets. (online) http://www.adb.org/sites/default/files/pub/2012/economics-wp-300.pdf (2 May 2012). Autani, Kritsada et al. 2009. Globalization of Capital and Thai Capital Market. (online) http://www.fpo.go.th/e_research/pdf/research_project_3_3_1(2552).pdf (15 December 2013). Bai et al. 2008. Hong Kong Competitiveness and Its Financial Services Cluster; Microeconomics of Competitiveness. Term Report. Harvard Business School. Curran, P. J. 2000. Competition in UK Higher Education: Competitive Advantage in the Research Assessment Exercise and Porter’s Diamond Model. Higher Education Quarterly 54: pp. 386-410. Daly, Donald J. 1993. Porter’s Diamond and Exchange Rates: Extensions of the Porter Diamond Framework. Management International Review 33: pp. 119-134. Drexler, Michael. 2013. The Financial Development Report 2012. (online) http://www.weforum.org/reports/financial-development-report-2012 (3 February 2013). Fiscal Policy Office. 2013. Thailand’s Preparation for the Financial Sector Master Plan. (online) http://www.fpo.go.th/FPO/modules/Content/getfile.php?contentfileID=4339(4 February 2013). Gábor, Márkus. 2008. Measuring Company Level Competitiveness in Porter’s Diamond Model Framework. in FIKUSZ Business Sciences: pp 149-158. Budapest Tech: Keleti Faculty of Economics. Hongkai, Liu. 2009. Analysis of China International Competitiveness of Financial Industry. Working Paper. School of Social Sciences, Daqing Petroleum Institute, China

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References (Cont.)

Howard, B. J. Stone and Ashok Ranchhod. 2006. Competitive Advantage of Nation in the Global Arena: A Quantitative Advancement to Porter’s Diamond Applied to the UK, USA and BRIC Nations. Strategic Change: pp 283-289. International Institute for Management Development. 2012. World Competitiveness Yearbook 2012. International Institute for Management Development. Kanitpong, Tatchawan. 2010. The Competitiveness of Thailand in the Challenges AEC. NIDA Business Journal 7, November: pp 71-92. Laetitatia, Radder and Lynette, Louw. 1988. The SPACE Matrix: A Tool for Calibrating Competition. Long Rang Planning 31, 4: pp 549-559. Muengmor, Panpat. 2011. Thailand’s Competitiveness Advantage in ASEAN after Crisis among the Five-selected ASEAN Nations: Indonesia, Malaysia, Philippines, Singapore, and Vietnam. Master Thesis. Lund University. Porter, Michael E. 1990. The Competitive Advantage of Nations. New York: Free Press. Rowe, Mason et al. 1994. Strategic Management: A Methodology Approach. 4th ed. Reading: Addison-wesley. Sledge, S. 2005. Does Porter’s Diamond Hold in the Global Automotive Industry. Advances in Competitiveness Research 13, 1: pp. 22-32. Thavaramara, Tipsuda. 2012. Interlinkage ASEAN Securities Market. National Defence College Diploma. National Defence College. The World Economic Forum. Global Competitiveness Report 2012-2013. (online) http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf (2 December 2012). The World Federation of Exchanges. WFE 2012 Market Highlights. (online) http://www.worldexchanges.org/files/statistics/2012%20WFE%20Market%20Highlights.pdf (3 February 2013).

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Ppt bmic edited 180813

Education

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