Introduction to Thailand's Stock Market

Summary

In this video, Dr. Oliver Gochal provides a detailed overview of the Thai stock market, including insights into its structure, historical performance, and market trends. He compares the SET and Mai markets, examines trading patterns, and highlights the impact of insider ownership and float characteristics. Dr. Gochal also discusses the performance of IPOs in Thailand, revealing the significant returns on the first day of trading. This comprehensive guide is essential for investors looking to understand the unique features of the Thai stock market, its risks, and opportunities.

Takeaways

• 😀 The Thai stock market consists of two main markets: the SET (Stock Exchange of Thailand) and the MAI (Market for Alternative Investments), with SET being the larger of the two.
• 😀 The SET has a market cap of approximately 19.8 trillion Baht (~550 billion USD) and lists 669 companies, while the MAI has a market cap of 550 billion Baht (~15 billion USD) with 188 listed companies.
• 😀 The Thai stock market is heavily influenced by the services and energy sectors, which together account for nearly 50% of the market cap.
• 😀 Foreign investors are the largest group of market participants, with net purchases totaling 221 billion Baht in the past year, while local investors were net sellers.
• 😀 Over the past 20 years, the SET has outperformed the S&P 500 until the COVID-19 pandemic, after which the performance of both indices aligned closely.
• 😀 Daily performance of the SET is relatively stable, with most trading days showing fluctuations between -1% and +1%. Only a few days in 40 years saw major gains or losses above 10%.
• 😀 The current P/E ratio of the SET is around 17.8, which is slightly above the long-term average of 16, indicating the market is reasonably valued.
• 😀 Fridays are the best-performing trading day of the week, with an average return of +0.21%, while Mondays show the weakest performance with a negative average return.
• 😀 Historically, January has been the best performing month, while September has been the worst in terms of the probability of positive returns.
• 😀 IPOs on the SET have historically offered strong returns, with an average first-day return of 24.3%. Returns are even higher on the MAI, where the average first-day return is 52.2%.

Q & A

What are the two markets that make up the Thai stock market?

The Thai stock market consists of two markets: the Stock Exchange of Thailand (SET) and the Market for Alternative Investments (MAI). The SET has a market cap of around 19.8 trillion Baht, while the MAI is much smaller with a market cap of approximately 550 billion Baht.

What sectors make up the majority of the market capitalization on the Stock Exchange of Thailand (SET)?

The majority of the market capitalization on the SET is made up of services and resources companies, particularly energy companies, which account for almost 50% of the total market cap.

Which companies are the largest by market cap on the Stock Exchange of Thailand (SET)?

The largest companies by market cap on the SET include PTT, the national oil and gas company, with a market cap of about 1 trillion Baht, followed by Airports of Thailand (AOT) and other companies such as PTTEP, Delta Electronics, and Gulf Energy.

Who are the largest market participants in the Thai stock market?

The largest market participants in the Thai stock market are foreign investors, followed by local investors. Foreign investors bought about 8.7 trillion Baht in value from August 2021 to August 2022 and were net buyers, while local investors were net sellers.

How has the Stock Exchange of Thailand (SET) performed historically compared to the S&P 500?

Historically, the Stock Exchange of Thailand (SET) has outperformed the S&P 500 by a significant margin until the COVID-19 crisis. Both indices have performed similarly in recent years, with the SET showing a gain of about 333% over 20 years compared to 227% for the S&P 500.

What is the average daily performance range of the SET over the past 40 years?

Over the past 40 years, the daily performance range of the SET has mostly fluctuated between minus 1% and plus 1%. There have been only 5 days in 40 years where investors gained more than 10%, and 3 days where they lost more than 10%.

What does the Price-to-Earnings (P/E) ratio indicate about the SET?

The P/E ratio of the SET has averaged around 17-18 times over the past five years, slightly above the long-term historical average of 16. This suggests that the market is reasonably valued and not overpriced, with a PE ratio in line with pre-crisis valuations.

Which trading day of the week has historically shown the weakest performance on the SET?

Historically, Monday has been the weakest trading day on the SET, with an average return of minus 0.15% and less than a 50% chance of making a positive return.

What is the trend of returns by month on the SET, and which months perform best?

January and December are the best performing months on the SET, with average returns of 2.27% and 2.26%, respectively. January also has a 60% probability of a positive return, while September tends to have the lowest chance of making a positive return.

What is the significance of insider holdings in the Thai stock market?

In the Thai stock market, insider holdings are notably high, with almost 38% of shares being held by insiders, such as owners and managers. This is much higher than in Germany, where only 9% of shares are held by insiders. This structure results in a relatively low float, meaning that less than half of the shares are tradable in the market, which can affect shareholder influence in companies.

What has been the historical performance of IPOs on the Stock Exchange of Thailand (SET)?

Since 2003, IPOs on the SET have generally shown strong first-day returns, averaging 24.3%. IPOs on the Market for Alternative Investments (MAI) have been even more profitable, with an average first-day return of 52.2%. However, not all IPOs are successful, with about 74% showing positive returns, 22% resulting in losses, and 3% showing no return at all.