In 2019, the SET group had total revenues of THB 7,286 million, a surge of 11% from 2018. Operating revenues jumped by THB 162 million, as a result of a rise in the number of newly listed companies and new securities. Investment income rose by THB 362 million because of the “realization of gains from sales and mark-to-market value of investments.”
1. THAI BAHT
- The Thai baht has been strengthening against the U.S. dollar. From July 2020, the baht has appreciated by over 6% against the U.S. dollar, from 31.8 to the dollar to 29.8 as of December 17, 2020.
- According to officials, the appreciation is a result of Thailand’s hefty store of foreign exchange reserves that are strengthening the baht. Critics argue that there is a possibility that the Bank of Thailand (BOT) is trying to depress the exchange rate.
- For 2021, the National Economic and Social Development Council (NESDC), expects a 4.5% GDP year-on-year growth, boosted by a predicted 4.2% increase in exports and private investments.
- Likewise, the hoped-return for tourism once a COVID-19 vaccine is available should also increase Thailand’s current account surplus and the baht, with experts anticipating that the baht will hit about 29.25 to the dollar by end year, because of the current account surplus.
- Not all people are happy with the baht appreciating against the U.S. dollar, in particular, the exporters. On that note, the BOT has come up with three new measures to help slow the baht’s appreciation — the first measure involves increasing the investment limit of Thai retail investors from $200,000 to $5 million per year.
- Second, the BOT is allowing Thai locals to and businesses to open foreign currency deposits in Thailand. Third, the BOT has created a registration process for Thai foreign investors in bonds and equities to curb short-term speculation on the baht.
2. U.S. DOLLAR
- Increased financial empowerment in Thailand is negatively impacting investing in the U.S. dollar. Market reports show that the Stock Exchange of Thailand (SET) has been rebounding in recent weeks and is expected to perform better in 2021, implying that there is little incentive for the locals to invest in the volatile U.S. or European markets.
- The U.S. economic outlook is not looking good with consumers expecting the Federal Reserve to cut interest rates one more time because of the anticipated weakening of the dollar in coming months, and this is likely going to discourage investments in dollar.
- Research shows that Thai retail investors would likely avoid investing in the dollar, citing that the U.S. dollar has been declining against most Asian currencies following the aggressive U.S. trade wars that the U.S. alters to favor its trade imbalances.
- However, in 2019, the SET Index returns based on the U.S. dollar were impressive expanding at 9.7% from 2018, an indicator of foreign investor confidence on the Thai stock market.
- Meanwhile, SET has been actively promoting the “dollar-cost averaging (DCA) savings culture” leading to more than 80,000 active DCA investors equivalent to a 38% climb.
- As of 2021, Thai gold traders agreed to start using the U.S. dollar which is less volatile than the Thai baht. The Bank of Thailand announced that investors will now use the U.S. dollar for gold trading and settlement to soften FX foreign exchange volatility in the trade.
- According to the bank, quoting gold prices in U.S. dollars would imply that import and export transactions completed previously by precious metal dealers would not affect the Thai Baht. Moreover, trading in U.S. dollars will do away with the need to convert from U.S. dollar to Thai baht and vice versa.
3. PHYSICIAL GOLD
- Increased financial empowerment in Thailand has resulted in immense growth in gold trading. Thais buy gold for investing as the main reason because gold rarely loses its value, however, others do it because of their religion and as a sign of wealth.
- Thais invest in gold in three key ways, including selling to jewelers at Golden China Town — famed for fair dealings, via traditional gold coins, and gold investments — which are regarded similar to Bitcoin investments. In this regard, Thais worried of losing family money are assured of selling their gold during financial difficulty.
- Thais believe that the stock market is highly volatile and far too risky; hence, they prefer to invest in gold, which they see as being safer than the stock market. In the nation, financial empowerment has pushed many local investors to flock gold shops to purchase physical gold. As of 2019, there were more than 7,000 gold shops in the nation allowing Thais to buy physical gold anytime anywhere.
- Thailand also imports and exports gold, which accounted for 3.11% of total exports in 2019. Gold sales in 2019 were 66% higher than those in 2018 and reached $7.28 billion in 2019 from $4.37 billion in 2018. In 2011, during the infancy of gold investments in Thailand, total imports totaled $16.5 billion while exports reached $5.8 billion.
- Thailand has a well-established gold economy that is driven by local gold shops that act as platforms for buying and selling gold based on weight, creating an economic cycle that does not need to peg the gold on the nation’s currency. Importantly, Thai gold is around 23.2 karat about 96.5% pure.
- The onset of the pandemic saw many Thais rushing to jewelers to sell gold resulting in a major cash crunch for jewelers. The consumers’ actions prompted a response from PM Thailand Prayuth Chan-Ocha urging them not to sell gold in large amounts.
- Most of Thai middle-class has savings in gold and bank deposits and intend to redeem their gold resulting in force-buying for jewelers, who claim to have inadequate capital to buy the huge amounts of gold. Failure to make purchases may result in loss of customers, another challenge jewelers have to cope with.
4. Virtual Gold
- Financial empowerment in Thailand has resulted in gold investments fueled by virtual gold platforms. Thais can now invest in virtual gold via various online platforms, including the Ausiris website, mobile applications, and blockchain technologies.
- Thai investors using the Ausiris website get their gold traded with neighboring countries like Cambodia, Laos, Malaysia, and Myanmar. However, the free market policies in Malaysia and Vietnam can be challenging for Thais investing in virtual gold as they allow new entrants into the Thai market leading to market share loss for local players.
- Thai goldsmiths are also adopting new technologies to match the needs and preferences of modern buyers. For example, Ausiris has an app dubbed, “Ausiris Gold Investment Trade” with features such as buying and selling gold, along with figures displays, including the prevailing rate of return, among other features.
- Online gold trading in Thailand has significantly boosted trading volumes necessitating a need to extend the current trading hours that end at 11:55 pm by 2 – 4 hours. In Thailand, virtual gold trading is supported by gold online futures (GO), with an underlying gold bullion of 99.5% purity.
- Go has resulted in increased trading volume, averaging about 8,000-10,000 daily contracts, with most trade happening at night. Analysts predict that if the trading period gets extended by 2 – 4 hours, trading volume may spike by at least 30% and 50% if a 24-hour trading period.
- In 2019, the trading volume of online gold futures in Thailand compared to 2018 increased 6 times. Equally, from 2018 to 2019, the SET50 index options and SET50 index futures also increased by 23.61% and 0.19%, respectively.
5. GOLD SHARES
- Thailand does not officially trade gold shares; however, there exist brokerage firms that allows Thai investors to trade gold ETFs via the SPDR.
- Presently, SPDR gold shares trade Stock Exchange of Hong Kong, Singapore Stock Exchange, and the Tokyo Stock Exchange.
- However, Krung Thai Asset Management (KTAM) offers domestic investors a simpler way to invest in gold ETF off-shore. KTAM’s GLD ETF is an exchange traded fund that tracks a foreign gold fund. In this regard, GLD is listed on the SET to enable Thai investors to invest in gold.
- KTAM’s gold RMF is an open-end alternative fund, RMF, feeder fund with an investment policy asserting that the fund is to “invest only in SPDR Gold Trust fund at no less than 80% of the fund’s NAV per year. The fund will also invest future contracts for hedging purpose at no less than 25% of the foreign assets.”
- The SPDR gold trust (master fund) trades 96.3 pure gold. The objective for SPDR gold shares is “to reflect the performance of the price of gold bullion, less the Trust's expenses.”
- Thai people can trade gold futures even late into the night. Thai gold futures exchanged on the TFEX trade have a purity of 96.5% and are traded within six sessions, including pre-open, morning session, pre-open again, afternoon session, pre-open, and night session the commences at 18:50 and ends at 03:00 hours the next day.
- Financial empowerment and inclusion has led to competitive businesses in precious metals, in particular gold. Thai jewelers charge the locals a small fee for the skills of creating beautiful jewelry in gold. Statistically, in Thailand, it would cost an individual less 40% the price he/she would have paid for a piece of gold ring in the west.
- Numerous shops have emerged and specifically focus on gold, and jewelry making. Notably, in Bangkok, the two most frequented and recommended places are Chinatown (Yaworat), with over 140 gold shops and at MBK mall, where Thai gold investors will find many excellent gold shops.
- The Thai jewelry market is a major export earner for the country. The gems and jewelry trade in Thailand continues to thrive due to centuries of experience and a vast network of artisans and a strong manufacturing to marketing procedure. Besides gold trading on the Thai capital markets, gems and jewelry production provides a steady source of employment and income for miners, gem cutters, merchants, and designers.
- Traditionally, Thailand was famed for its colorful stones — rubies and sapphires; however, over time, and through empowerment, Thais started focusing on trading other goods, including “finished gold, silver jewelry, unwrought gold, unwrought diamonds, costume jewelry, synthetic stones, pearls, and semi-precious stones.”
- Thai jewelry remains of high quality and most companies operate as original equipment manufacturers with limited scales of capacity making it to serve as a major supporting unit for the jewelry industry. The Thai gems and jewelry industry has created a name and reputation for unrivaled skilled labor in “color stone quality enhancement, casting, molding, and gem setting,” especially in gems or stones with complex details.
- In 2019, the Thai precious metals sector generated an estimated $15 billion in export sales, a 30.91% in increase over the previous year. Gems and jewelry exports, excluding unwrought gold reached approximately $8 billion a jump of 6.34% compared to 2018 figures.
- Financial empowerment and inclusion in Thailand has made Thai a globally renowned manufacturer and exporter of high-quality gems and jewelry, and an attractive destination for big jewelry companies to enter the market, driven by “a strong infrastructure, a capable workforce, and an attractive investment.” Thailand ranks 21 among 190 countries in the ease of doing business, in 2020, consequently big gems and jewelry corporations like Abbeycrest, Pandora, and Rosy Blue Diamond have started investing in Thailand.
A review of existing financial reports and statements published by the relevant authorities working in Thai investments, including the Bank of Thailand, National Economic and Social Development Council (NESDC), Stock Exchange of Thailand, Krung Thai Asset Management (KTAM), SPDR Gold Trust fund, TFEX, among others provided in-depth insights into what impact increased financial empowerment in Thailand has had on investing in Thai Baht, U.S. Dollars, physical gold, virtual gold, gold shares and jewelry, among other investments. Overall, the findings indicate that Thailand has a strong and attractive market regarding gold and jewelry investments having seen huge jumps year-over-years. Overall, the sections above provide a comprehensive report on the impact increased financial empowerment in Thailand has had on investing in various classes of assets.