Bank stocks underperformance & Thailand scores.
Since 1997 I wrote many times that as a rational SET investor, my own view is to avoid the Bank stocks. Over the years Bank stocks here had periodic rallies and ever so often we get messages asking or plain telling me: "Surely the Bank stocks have now awoken". Yet since 1997, it has been wise to abstain from these liquidity driven laggards.
While there have been brief periods of outperformance, in general Thai Bank shares have been big laggards since the Asian crisis started in 1997. But do not count brokers or research analyst to tell you about this because this sector is mighty big and powerful and it is not in the interest of brokerage firms to expose nor write about this fact. Looking at the bank index graph for the month of October, we see that this month was their major catch-up period; but it was nothing but "a flash in the pan", which quickly faded when the SET corrected.
Here we show a relative performance of the Bank index, including the month of October, as published by Tisco. You can see from year 2001 to date, was yet another year where this big & dominant sector, just lagged.
Yet no sector on the SET is more analyzed more covered and more written about then the Thai Bank shares. Some novice investors or brokers still believe that buying Bank and Finance shares is the best way to "play" the SET recovery. This view has been wrong for over half a decade.
Here at Thaistocks.com we do not "play" with investments. Instead we advocate investing for the long term on good fundementals and for high dividend yields.
The Thai bank stocks do not pay any dividends and still do not represent good relative value, as compared to many other shares on the local stock Exchange.
Currently I wonder how their huge bond portfolios are holding up, considering the sharp increase of long term maturity Bond yields, since July. Long term bonds prices drop in market value as interest rates rise -and the 10 year long term bond in Thailand has seen a near doubling of yield, since the bottom last year.
Just as with currency gains or losses, bonds are market to the market and so should show huge unrealized losses. Here we see again that the Thai bond holders, an overly shy bunch in this cycle, have not done well at all if they invested in only longer maturity bonds since the turn of this century.
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"The Economist" magazine (see the next table here) prides itself in being global and outspoken. Yet, as with the other glossy "Far Eastern Economic Review", Thailand only gets sporadic coverage. Odd dont" you think? Yet, Thailand is the biggest economy in SE Asia. And as this second table here shows from their latest issue, Thailand has made the most impressive gains in both relative political stability and stock market performance this year. Why can"t this or other magazines point out this multiple improvment with some words?
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The SET has correct as I anticipated. While I was more cautious since September, I definitely issued a clear & dire warning sign as the SET peaked by October 31.
Long term investors righly so questioned this, yet we see how bull markets can have mean corrections. And since there are no Thai capital gains taxes to individuals and commission rates are so low, it does make sense for pro-active members to fine tune their investments at times. Just holding on with a view that all shares will eventually rise in a bull market, has and is not my long term investment thesis.
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We always welcome your comments at our quality member lounge. While I do not always agree, and at times am glad I did not (like recently with upbeat statements on Hemraj, now on the SEC monitoring list), I do welcome all constructive ideas, questions or perceptions.
Certainly the member whom pointed out that I was missing out on the up beat shipping cycle had a very good point which I then embraced. The idea of our lounge is not whom is right or knows more, but how we can collectively brain storm some ideas. Don"t be shy, this is our private forum!
Through controversy or oposing points of views, often a truth emerges.
Best Regards to all Members,
Paul A. Renaud.
