ETFs are open-ended funds that track specific indices and can be traded like securities. The stock exchange will start trading ETFs in the second quarter next year, which is expected to attract more liquidity to the market.

Representatives from the SET are also planning to discuss the funds this month with leading ETF fund managers, such as Barclays Global Investors and State Street Global Advisers, as well as market makers like Citigroup, to gain some perspective on trade. After it has heard from experienced traders, the SET will conduct a market survey to design an ETF product that suits the Thai market.

"ETFs will attract more liquidity to the market. Also, they will give investors have more investment options," said SET senior vice president Sethaput Suthiwart-Narueput.

Sethaput said ETFs target investors who prefer less risk than is normally associated with direct investment in securities. He said these funds are very popular in many overseas markets.

The compound annual growth rate of the net asset value (NAV) of the global ETF market is about 70 per cent. The NAV of the global ETF market was more than Bt18 trillion as of May. The first batch of ETFs was launched in 1993.

Sethaput said that within the region, countries like South Korea, Taiwan, Singapore, Malaysia and China already trade ETFs. However, he said that launching a successful ETF can be difficult.

"It requires a sufficient number of indices for the ETF to invest in to create market making and support the arbitrage transaction," he said.

Siriporn Chanjindamanee

The Nation