Thailand pushes to create trading hub Thailand's stock exchange is spearheading the country's push to transform itself into a regional capital markets hub, after a record year which saw the bourse become Asia's second-best performing stock market. Fuelling investor interest has been a surge in initial public offerings on the Stock Exchange of Thailand, new electronic trading links between SET and regional exchanges, and a record boom in cross-border M&A activity by Thai companies, with more than $25bn of agreed deals in 2012. IN Developing Markets & Asia Charamporn Jotikasthira, SET president, said he expected to see at least 30 IPOs this year, worth more than $4bn, up from 24 worth $3.6bn last year. But the real prize for Thailand, and in particular the SET, is what Mr Charamporn calls "regional linkages." SET last year became part of the Asean Trading Link, connecting its securities trading with that of Malaysia and Singapore. It also renewed an agreement to help develop the tiny stock market in neighbouring Laos, and earlier this month announced a deal to help Myanmar develop and launch a stock market within the next few years. More significant are Thailand's recent moves to ease regulations that govern stock market listings as well as bond issues, in order to attract regional business. The moves have already paid off with Laos's planned issue of its first Thai baht-denominated bond, and planned listings of holding companies with most of their business outside Thailand. These include CK Power, a holding company with hydropower projects in Laos, and an infrastructure fund set up by BTS Group, operator of Bangkok's light rail system. The two listings will be among the biggest share sales this year, said Mr Charamporn. Analysts have broadly welcomed SET's growing ambitions. "We remain optimistic but there's some reason for caution," said Ian Gisbourne of Phatra Securities. "The domestic economy should be well supported by stimulative monetary and fiscal policy, while real interest rates remain firmly negative and the government is likely to run a fiscal deficit again this year," he noted. But relative to earnings, the SET Index appears expensive by the standards of the past 10 years; foreign ownership of Thai equities and bonds is at a record high; and the risk is that inflation will surprise on the upside in 2013. If it does, rates could follow. On the upside, however, is the government's recent reconfirmation of what Mr Gisbourne called "the greatest infrastructure spending programme in a generation," worth more than Bt2,200bn ($71bn) over the next seven years. Another Bangkok-based analyst echoed broad optimism but warned that the risks could include pressure on margins, the adverse impact of any increase in inflation, "unconventional policy responses" and any surge of domestic political instability that periodically rocks Thailand.