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Nitty, gritty investing fun

PHUKET: In previous articles in this series on the basic introductory steps of investing in the Thai Stock Exchange, I covered most of the basics about trading in the Stock Exchange of Thailand (SET), including some valuation and timing indicators, reasons why one should consider employing a Thai broker over an international one, the function of Non-Voting Depository Receipt (NVDR) stocks for foreign traders, and the official portals for researching Thai companies.

By Steven Layne

Tuesday 3 January 2017, 11:00AM

Investors look at share prices at the Stock Exchange of Thailand (SET) in Bangkok. Photo: AFP

Investors look at share prices at the Stock Exchange of Thailand (SET) in Bangkok. Photo: AFP

In this fourth and final installment of the series, I will try to shed some more light on the entangled web of public companies and the Thai economy

As alluded to in my previous articles, getting a grasp on the SET may seem overwhelming at first, considering that there are hundreds of companies listed under dozens of sectors and indices on the SET, in addition to the Market for Alternative Investment (MAI).

For each listed company, there is a continuously-updated stream of financial data and research available – from the latest quarterly reports and news releases directly from the companies themselves to third-party news, financial fundamental analysis and “insider” tip-offs.

Knowledge is power, and the companies with higher market capitalisation (the product of all the shares and the share value) will tend to have more transparent and dependable shareholder relations and communications.

A good starting point is to to study the big players – the large market-cap companies in the SET 50 or SET 100 – which tend to set the trends and reflect the health for the rest of the economy.

Happenings with Airports of Thailand (AoT), for example, will certainly impact business of all the other SET-listed aviation transport company, be it Thai Airways (THAI), Bangkok Airways (BA) or Air Asia (AAV), to name a few.

And despite the notion that the Thai economy is all about agriculture, electronics and tourism, truth be told energy and petrochemicals are much more significant drivers.

By far, the largest SET-listed company, measured by revenue and market-cap, is PTT, a state-owned (the Ministry of Finance holds 1 51% stake) petrochemical conglomerate with over a market-cap of more than B1 trillion.

Trading for about B365 per share at the time of press (late December), PTT is the only Thai company in the Fortune Global 500, and it should also be noted that its parent PTT Group owns a number of other profitable SET-50 subsidiaries (PTTEP, PTTGC, TOP and IRPC).

Another key corporate cat in the Thai economy is agrofood giant Charoen Pokphand (“CP”), a powerful, private Chinese-Thai conglomerate that provides exposure to investors through a number of SET-listed subsidiaries, namely CP All (CPALL), CP Foods (CPF) and True Corporation (TRUE).

With a market-cap of more than B550 billion, CPALL owns the franchise rights for 7-Eleven stores in Thailand and is also a major shareholder in Siam Makro with an 18% stake; CPF, with a market cap of about B255bn, is a major player in the farm, feed and poultry business, in Thailand and globally.

Though not an agrofood firm, TRUE (market cap: B275mn) is CP’s telecommunications arm, which is constantly in heated competition with the likes of Advanced Info Service (ADVANC), Total Access Communication (DTAC) and others.

Competition is one of many factors to keep in mind when comparing stocks. Some companies and sectors enjoy little to no competition in their respective sector or industry.

Padaeng Industry (PDI), a smelting and zinc specialty company is the only listed company in the SET’s Mining index, for example. Sugar market share, in contrast, is contested by four companies (KTIS, BRR, KSL and KBS), who all produce the same products: table sugar, fertiliser and ethanol from sugarcane.

Some brands or products have multiple associations within a network of companies. For example, if you were looking to invest in Mama, the Thai instant noodle market leader, there are at least three listed companies with a stake in this brand, namely, Thai President Foods (TF), President Rice Products (PR) and Saha Pathanapibul (SPC).

As you can imagine, keeping abreast with world, regional, national and local industry and market trends is an essential skill. Luckily, all the brokers have trained economists analysts on the payroll who study the various factors at play and will provide their views, predictions and recommendations for free.

Some of the tips I have read are logical and have proved to be fruitful, while others tend to appoint too much weight on long-term forecasts, overlooking immediate factors or threats at play – think politics and the weather.

In the end, it’s up to you to find your own unique preferences, style and strategy in the SET, and there’s only one real way to learn – to get out there and start trading! Even if only on paper to start with, it can be rewarding – and addicting – hobby, if not a supplemental income source.

See also:

SET to succeed: A ‘crash’ course in the Thai stock market (Click here.) 

Where the SET is just the start (Click here.)

Starting at the SET: Getting down to business (Click here.)


Disclaimer: This article should not substitute qualified “investment advice”. The author does not represent any bank, fiduciary, broker or consultancy of any kind and is merely one individual whose aim is to learn more about investing in the Thai stock market, and share his direct experiences with others, and thus assumes no responsibility or credit for any action or inaction by readers, whether resulting in gain or loss. Serious investors are advised to consult with a qualified financial adviser or fiduciary.

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