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Starting at the SET: Getting down to business

Starting at the SET: Getting down to business

Having read the first few instalments of this introductory series on the Stock Exchange of Thailand (SET), you might be feeling confident enough by now to go and open a brokerage account at your preferred Thai bank… or perhaps you’re still a little sceptical or intimidated about investing in Thai public companies. Who could blame you? There are plenty of headlines in the popular dailies alluding to how vulnerable the Thai economy supposedly is, citing a number of concerns, be it sluggish foreign direct investment, rising minimum wages or a strong baht impacting the country’s export potential, for example.

economics
By Steven Layne

Sunday 16 October 2016, 02:00PM


At face value, investing in the Stock Exchange of Thailand may seem overwhelming, but it needn’t be. Photo: AFP

At face value, investing in the Stock Exchange of Thailand may seem overwhelming, but it needn’t be. Photo: AFP

No doubt, competitive labour in neighbouring markets boasting cheaper labour and weaker currencies may threaten the profit margins and impact the bottom line of some players, who in turn may be compelled to consider shifting part or all of their production and manufacturing bases to said countries. To some extent, these are valid concerns, but you’d be wise not to take such pessimistic rhetoric at face value. The Thai economy, as reflected in the SET, is very dynamic and its future prosperity will not depend on third-world wages and cheap goods for the world market. In any case, following are some more observations to help put your mind at ease about SET trading.

SETting the bar

When I first started trading in the SET, one of my Thai friends asked if I was worried about the risk of putting my money at the mercy of corrupt corporate practices such as insider trading. In short: “No!”

No doubt, there will always be shady business deals taking place behind the scenes, be it in the SET or any other stock exchange; the NYSE, LSE, TSE, SEHK, SGX – none of these reputable financial marketplaces are immune to fraud or unfair trading – but all of them, including the SET, are overseen by a Securities and Exchange Commission tasked with monitoring, auditing, regulating and holding companies accountable to stringent rules and criteria so as to maintain their listing status.

SET company executives can be – and are – held accountable for shady dealings regularly, usually in the form of hefty fines. Also, new rules issued by Thailand’s SEC effective August 2016 subject directors or executives found guilty and fined for unfair trading practices to SET company management bans for up to three years. As for individual small-time traders worried about their investments, two words: stop loss – set them. But if you fail to do so, rest assured that the SET sets 30-per-cent ceilings and floors for all stocks, in which trading will cease as soon as one of these limits is reached during any given trading session, alerting regulators to examine any suspect anomalies, and more importantly, ensure investors have some basic protection.

Penny Trading

While the real money in the SET is made by fat cats overseeing large funds or working for internationally-oriented institutional investors, that’s not to say that everyday, ordinary folk who can barely claim a six-figure-Thai-baht annual income – like this author – can’t reap some financial fruit from the lucrative SET tree with minimal starting capital.

Many brokers trade with an initial deposit of as little as B5,000. The share price for listed companies can range from a handful of satang (there are 100 satang per one baht) to many hundreds of baht. One thing to keep in mind, however, is that you can not just buy one share in a SET company, but must buy a minimum of one lot of 100 shares.

Zest Real Estate

Let’s say you had a hunch that fast food was on the up and wanted to own a stake in Burger King, Pizza Company and Swenson’s restaurants. The parent company of these franchises in Thailand is Minor Corporation (MINOR) which, at the time of press had stock selling for about B38.75 per share. Thus the minimum stake you could get in this security at said price would be 100 shares for B3,875, not including commission and tax. Or, let’s say you believed in the future of low-cost-carriers, and wanted a stake in market leader Thai AirAsia, owned by Asia Aviation Pcl, which was selling at time of press for about B6.45 per share. Your minimum stake in this company, therefore, would be 100 shares for B645, less commission and tax.

Keep in mind, however, that most brokers charge a minimum daily commission (on days a transaction is made). For my broker it’s B50. So thus a maximum B500 investment on such a day would mean that that stock would have to appreciate 20% just to break even on the sell (B50 or 10% commission on the buy, and another minimum B50 on the sell). Thus, it’s a good idea to create a spreadsheet factoring in commissions to determine your optimal minimal investment per day, and a realistic target appreciation to make profit.

Stay tuned for my next instalment in which I’ll share more of my SET revelations.

See also:

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

Where the SET is just the start (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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