The "Anatomy" of dealings with Thai brokers
Since the beginning of our web page last April 30 "97, thaistocks.com has forcefully suggested an investment approach of (mostly) favoring smaller stocks, as we know some of these represent outstanding fundamental values. While we got some criticisms for doing this (mostly from big liquidity obsessed institutions), our overall record to date demonstrates our conviction. While liquidity is attractive, we remind investors that highest return, with lowest incurred risk, is what it’s all about!
We do not want to rehash our performance to date here again. You, our valued subscriber through poking at our web site, can make this judgement by your self. During the past many months, I have given a number of Thai listed companies which I like and which overall are increasing in value regardless of the SET’s dances and troubles. Corrections in these should be viewed as buying opportunities.
Thai brokers are first and foremost set up for trading and so highest portfolio turnover, not fundamental investing.
Visiting such brokers in Bangkok (or the provinces) will quickly show you that here, it’s more like a "Las Vegas type glorified gambling place", than a serious professional securities investment operation. In a more subtle way than first meets the eye (just like McDonald’s with their hamburgers) Thai brokers promote a highly cultivated environment for speculating and trading rather than astute investing. At a typical Thai broker’s office there are very few (if any) published research reports handed out, there is even less fundamental analysis. What little there is, too often is just technical analysis of graphs and recommended "trades of the day". If you visit any one of these "gambling den’s" you can observe that few if any customers are ever reading. Clients are conditioned to just stare at the teakwood circled stock boards and then watch and trade on the symbols that are flicking most. All the while the free soft drinks, coffee and Thai deserts, roll along. People are chitchatting, perhaps of last night’s soap opera, hoping to just get lucky that day. Just like in glorified Las Vegas but without the buffets or the mirror ceilings. If you ask one of these customers in the soft Thai language, "but what does this company do", too often (unless it’s a Bank or a Finance company) the answer is "mai rue" meaning "don"t know". They will then tell you that it does not matter. One such Ph.D., managing director of Adkinson Securities, used to tell "it's all a liquidity driven market where fundamentals just don't matter...it's liquidity driven not fundamental driven". This has been cultivated progressively to a ridiculous degree for near a decade! Surely, it is one reason the SET crashed and burned.
In the past I would countless times observe customers trade in speculative margin accounts when in fact they had no idea whatsoever how such speculative accounts worked. On one such occasion, after staying beyond trading hours I noticed NFS broker clearing the chairs of the trading room so to set up a big "table". Oh good I reasoned; now they are going to have a seminar on explaining how to carefully trade on margin or how to look at a companies" inherent value. No not so, they just cleared the floor area so to make room for an abused Ping-Pong table. It quickly became an area from "playing stocks" to chasing that "little white ball".
Be very careful entering your orders. Make them repeat every time what you said. Also, all orders are day orders only. In Thailand there is no such thing as a "good until canceled order". The broker may promise you he/she will re-enter this order every day until filled but if she is sick or absent you are out of luck. Remember there is hardly such recourse as a complaint. In my long experience here no complaint letters ever get answered. This is so even while the SET has an established rule that brokers must answer all such letters.
Buy and sell orders are filled based on your price limit given and solely on a priority status. If you enter your order first you get filled first should the stock price hit your stated price limit. I advocate entering most orders well before the market opens at a limit price and then making very sure the broker has indeed entered this order. For a strange reason a few take routine discretion only to enter your order later thinking they did you a favor.
Be acutely aware that your broker’s phone can and will be busy, especially if the market heats up.Nothing is more frustrating then seeing your chosen price flick by and then not being able to contact your broker. Never ever, assume the Thai phones (or the electric) are always working. When the market picks-up surely your broker’s phone will too often go busy. I caution subscribers to be very clear on your orders because if a mistake is made you will not have any recourse beyond the brokers good will. I do not ever recommend market orders. Besides all the trading they promote there are no "stop loss orders", no "fill or kill" orders no "stop-limit orders" etc. Daily price limit orders are about all you can ask for.
Do not count on your broker to give you company news. They may or may not as they assume it’s not very important. You should follow this yourself through the internet on the SET’s home page (this web address is shown under "SET" at the left column at our web page). Look under "news" and then type in the company’s symbol. One word of caution, when earnings are released you must look under the heading "today’s news", as they will first report earnings only at this location. You will have to open every single "page" here in order to see if the company you invested in already reported. Strangely so, the SET’s homepage do not mention which company has just reported and so you have to double click on every one and this is very time consuming. Never assume that any of the Thai newspapers report these earnings, as they do not. Many of us in the past have written to local Newspapers asking, "why have a business section when you don"t report earnings"? As usual, they do not answer. Yes, here and there a few earnings are published in the press but this is a "hit and miss" affair and far from comprehensive. Kind of like a watch witch works and then not, basically useless.
If something goes wrong and regardless what, or who’s fault it is, you will not have any recourse other than the brokers good will and frankly, I would not count on that.In Thailand there is no established and effective consumer protection. Complaint letters to the stock exchange go near always unanswered and if you take a broker to court (which I did) you will loose because the fine print of the contract you sign will often be different to the stock exchange rules. I have evidence that S-One, one of Thailand’s biggest brokers, did not follow a firmly established regulation on "force sell" in a margin account. Because this broker also violated some other minor rules over time I had enough and decided to take them to the Phuket court. Regardless of my totally documented evidence the Thai judge completely ignored the properly court documented stock exchange rules and I lost.
I am sorry to have to report here that one of the acute and chronic problems in Thailand is that many members of the country’s elite far too often do not follow established rules and regulations.
There is no such thing as on-line trading. To my knowledge you cannot trade on line and contrary to previous expectations it is near impossible to open an account through the mail No doubt this is for legal reasons. While some brokers do have e-mail they insist that all buy and sell orders are phoned or faxed in. Thai brokers must verify your identity at the time of opening any new account and this is nearly impossible to do through the mail. Remember though, there are some real advantages of having a direct account with a Thai broker. For one the commission rates will be the lowest possible (0.55%, one way) and so probably less than half than you would pay dealing through a European or US broker. However working through a Hong Kong broker is also rather reasonable.
You will not incur any taxes except for a modest 10% withholding tax on dividends. You have complete privacy, as nobody in the world will know you have an account in Bangkok. This may be an advantage because if you enter orders through your "global broker" (say in New York), besides paying a much higher commission; you will not be assured total privacy from the broker’s "foreign desk". It also is my impression that if you deal with a US broker you may pay double taxed.
Having said all this, there are still tremendous advantages in owning shares in Thailand. For one, the market here is much less "price-efficient" and so there are huge capital gain opportunities. Two, the dividend payout ratios of many Thai companies (especially the smaller firms) are far higher than in developed countries. It is not unusual for a firm to pay out 50 to 60% of their total profits in annual dividends. This effectively puts a floor on certain stocks and so makes this a low risk and highest returns investment doctrine, which is what it’s all about.
With over ten years of experiences with many Thai brokers, thaistocks.com has come to the conclusion of only recommending Thai Securities (TISCO) as being a competent and most professional broker in Bangkok. While no doubt there are others worthy of praise, we only recommend TISCO. They have time over time again proven to be professional fair and reliable. My impression is that they require a minim deposit of around 2-3 mill. Baht to open a new account. Thaistocks.com is in no way affiliated with them (nor anybody else) and does not have any arrangement whatsoever in bringing them new clients! Our sole and only commitment is only to our valued subscribers! You can contact Ms. Chutinun at Thai Securities at her Bangkok direct phone number 633-6637.
Best Regards,
Paul A. Renaud
ThaiStocks.com
