Thai investors anticipate surge in depositary receipts popularity in 2024

Executives anticipate a surge in the popularity of depositary receipts (DRs) among Thai investors this year, with the investment tool offering a gateway to high-profile foreign stocks, risk diversification, and potential high returns. As they have become more prevalent on the Thai bourse, investors held DRs worth around 16 billion baht (US$466 million) on the Stock Exchange of Thailand (SET) as of the previous month, according to Rinjai Chakornpipat, senior executive vice-president and head of market division at SET.

The investment in DRs is witnessing a monthly increase, and it looks set to maintain its upward trajectory this year as a result of growing investor interest. DRs have recently emerged as an alternative for investing in foreign securities, providing a means for investors to directly invest in stocks through the Thai stock market.

DR issuers acquire foreign shares and offer them to Thai investors as DRs. This investment tool enables investors to invest in foreign stocks without the need to transfer money abroad, thus avoiding foreign currency exchange. Through DRs, investors have the opportunity to own stocks in foreign companies such as Microsoft, Apple, Alphabet, and Tesla.

Traditionally, investing in foreign securities involved a Thai or foreign securities company sending a trading order to a foreign stock exchange, which was traded in a foreign currency. Another alternative is a foreign investment fund, where the fund manager selects funds that align with the desired securities investment policy, reports Bangkok Post.

State-owned Krungthai Bank (KTB), a DR issuer authorised by the Securities and Exchange Commission (SEC), has issued DRs of Microsoft, Apple, and Alphabet. Additionally, KTB has issued DRs for large Chinese companies, including Alibaba and BYD.

Investors now have a choice of more than 20 DRs. According to KTB, DRs offer a sound investment choice for those looking to diversify risk across several countries. Last year, many US stocks yielded high returns.

Portfolio return

A source at KTB who wished to remain anonymous stated that if you invest in US companies through DRs, it can improve your portfolio return a lot, compared with concentrating on Thai stocks only.

In the following year, KTB has plans to issue more DRs from various stock markets worldwide, with some currently undergoing due diligence to select profitable stocks for investors. The bank has submitted a list of proposed DRs to the SEC, including US stocks such as Netflix, Starbucks, Meta, Amazon, and Booking.com, as well as the Singaporean offering Singtel. The source added that more choices are expected to be offered to investors next year.

In related news, Thailand’s economy is projected for strong recovery and growth in 2024.