Asiamoney Brokers Poll 2017: Best local - Thailand
Phatra Securities – the winner of Asiamoney’s Brokers Poll 2017 in Thailand – launched equity research in the Thai stock market in the early 1990s and has been through a few tie-ups over the years, including with UBS, Goldman Sachs and, pre-merger Merrill Lynch.
Phatra parted ways with the latter after a leveraged buyout in the wake of the global financial crisis, when Bank of America Merrill Lynch was formed, although the two still have a cooperation agreement in place, with Phatra providing its research to BAML clients and vice versa.
The current set-up of the team includes seven equity analysts and two economists. The sales and research platform serves both local and foreign clients, across the institutional and retail segments.
“While the team size has been stable, we have managed to substantially increase our coverage to small caps,” says Therapong Vachirapong, head of research at Phatra. “The foreign clients might not need to look at small caps, but local clients do care about those mid- and small-cap stocks. So we have been expanding our coverage from 50 stocks to nearly 100 over the last five years.”
Parichat Somboon, the head of domestic equity sales, adds that despite big pressure on commissions in the last few years, the firm's revenues have been relatively stable. One boost to the bottom line has come from the merger with Kiatnakin Bank back in 2011.
“As a result of the merger, we do all kinds of business. In terms of profitability, we are now in a very good position,” says Somboon.
The business diversification has helped, given the local stock market's somewhat lacklustre performance, and despite solid current account surplus numbers and a strengthening Thai baht. There have been some bright spots, says Vachirapong, in sectors such as chemical refinery and materials. At the same time, the market suffers from the lack of tech stocks, which have boosted indices pretty much all over the globe. With a lack of diversity in the local stock offering, the firm's research effort focuses on fundamentals and in-depth analysis of the smaller-cap stocks, rather than the technical approach.
“Since we have nearly 30 years of experience, we can give overseas investors beyond basic fundamentals for each stock,” says Somboon. “We offer top-down analytical evaluation and macro outlook that is related to those stocks and sectors, and that is crucial for long-term investment.”
Performance in the year ahead will rely heavily on the global recovery cycle because of Thailand's dependency on exports.
At home, the general election, which is due in the first quarter of 2018, will dictate the pace of performance, influenced by how the army, in power since the coup of May 2014, decides to manage the transition.
“After the coup, things have been stable and that has helped,” says Vachirapong. “Hopefully that will continue after the election.”