Biggest dichotomy on the Thai stock exchange, untold.

There are lots of dichotomies in this World. Here are mine du jour, investor wise.

In economics as well as in stock markets, professors and others tell us “there is no such thing as a free lunch”, that financial markets are most often efficiently priced  -and for that reason most people are best off just investing in ETF funds.  How many times over decades now have I/we heard this…and I wonder what would have happened to me, if I too, had believed in that.

There is an old joke about two economist whom walk down a dark street and see a $100 bill on the pavement.  The first one points this out in hurrays and tells the second one he will pick it up, who promptly answers "no, don't bother... as its impossible to get lucky like that surely in the efficient mkt. somebody would have long ago picked it up already", he points out.  Surely so they both agree and keep waling without bending over.

For years I here pointed out how in the Thai stock market smaller cap. growing companies can often be “the investor bargains which go begging”, as they are ignored by the institutions and brokers alike.  Institutions obsess with liquidity and brokers directly or indirectly want their retail customers to day-trade around liquid overvalued big cap stocks, not invest for the long term.  This investor theme has here worked wonders for many years as individuals surely do not have the same objectives or handicaps brokers or institutions have.  Presently the two regularly most active big cap Thai stocks are GULF and DELTA which combined trade at a p/e average of 70, while dividend yielding less then 1% !  Go wonder.    

After over 2 decades to superior returns. Here for some 2-3 years already, I’ve down-toned Thai stock mkt. investor wise enthouse -and here said so openly for all the reasons we know & pointed out, often.   One key reason being because of lack of real reforms -and Thailand being stuck in the classic middle income trap.

There is one big caveat to all this and its worthy to point out with gusto here -as year 2024 and Thaistocks.com comes to a close. Read below the to the efficient-market proponents will raise eyebrows and just about everybody else.  Remember, unlike other endeavors, in a stock market sillyness -can work to ones' advantage.

Consider these facts:  In the US bank depositors gets around 4 to 4.5 % in saving deposits interest -or slightly more in so on money market funds, while the S&P 500 Dividend Yield is presently 1.32% and the current dividend yield for Russell 2000 ETF as of October 31, 2024 is 1.17%. While the dividend yield on the classic Dow Jones index, is just below 2%.

Now contrast to these facts:  In Thailand one gets at most 0.3 to 0.5% interest paid on saving deposits with Thai banks. Minus the 15% tax withholding (or more if the interest paid per year exceeds 25,000 Baht, as I recall).  While the average dividend yield on the Thai SET index is just a touch above 3%.  (3.08% last I checked).

Here is the amazing pure mkt. in-efficiency never pointed out.  While completely against the mkt efficiency theory, advocates.  

There are a number of reputable long standing high-governance quality Thai listed smaller cap stocks, which pay 6-7 % in yearly dividends and have been doing so for years, while net profit of these are still overall increasing…and so likely are their already high, dividend yields.  Yet, all but ignored by brokers and institutions alike -while rarely pointed out.  To share here my top choices for some time have been AIT (4.42), AUCT (9.10), TOG (10.30) all of which show nicely growing earnings.  But surely -and I know of various others- which I here mentioned over time, like just 2 examples SABINA, FSMART come to mind.  Realize, these are not property stocks -nor funds which pay-out most of their net earnings in dividends. These are reputable long standing quality companies which trade at low p/e’s, while overall still enjoy growing earnings per share, yes despite the slow Thai economy…and not least with their dividend pay-outs barely around half their net profits.  So in time likely even higher dividend yields to come, overall, in a diversified portfolio of such.

Now how can it be that Thai bank deposits here are barely yield 1/20 (!),  compared to such high dividend yields by quality companies!  And this vs. in the US, bank deposit rates are around double their average dividend yield there on various US stock indices -and even higher such distortions compared to smaller higher growing US listed companies.  

Remember, the old theorem:  a stock is worth the present-value (PV) of all its future expected dividends.   My evidence here that stock mkt. efficiency is an over hyped concept -and here is the proof.  Enough said.  

Just to here get here all the efficient mkt. economist and others, heads rolling! They may feel this way, but they have been proven wrong.