Brokers not just regulators to blame.
Here is an open letter to the Thai Broker community complaining and stating about how the local industry blew all by themselves:
"For years Thai brokers (sorry I know I am generalizing) just advocate trading the devil out of things rather then promoting sensible investing. Instead of educating clients how to invest and build positions in good companies the norm is just trade and ask questions later.
When I was in your offices I just briefly spoke of two value shares examples, PR and KWH. Both of you laughed.....(yes, i know low trading volume), yet both of those shares are higher today in market price then when we first met 6 months ago all the while paying over 10% dividends. And while the SET dropped some 25% since, these shares in fact increased in price.
On September 1, Thaistocks.com will post the quarterly performance on their "top 30 model portfolio" of export oriented shares. It will show again that this universe of shares beat the pants off the index, yet one more time! For 3 years now value shares have by far outperformed the more liquid big bear cap.s. (Just like Thaistocks.com has written for very long about).
Yet, I ask you:
How many value shares do your clients own? Do you and your colleagues build positions in good solid fundamental shares or are you just like all other brokers ....all day long nurturing trading positions? We know the answer to that.
Brokers whom advocate most only short term trading in the US for example have proven:
1) high compliance problems,
2) customer burn out resulting in bad memories of the SET.
3) wasting quality time in guessing short term movements on the SET, instead of building businesses.
And this all at the expense in then not building good positions in solid fundamental shares which have earnings even in the current environment.
You Thai based brokers blast low stock trading volume at every occasion, no matter how lowly valued a listed stock is. This just as an excuse and smoke screen to further clients into being trading junkies. In USA you would never get away with this.
No wonder, only 1% of total savings in Thailand go to into SET shares... as your industry for years nurtured trading and short term benefits, this over customers advantages in buying values for the long run with some of their more serious principal.
No wonder 63 million Thais most all view the SET only as a speculative bin, rather then an alternative in investing. Your very industry is at fault -just as much as the regulators."
We send the above letter to an executive at a local Brokerage house, here is how he answered:
"I agree with you - the broking community has only itself to blame – and the punishment now being dished out by competitive forces will be brutal -Thai brokers were too fat, too inefficient, did not actively engage the market regulators to develop the capital markets - the stats speak for themselves : there used to be 50 brokers and 20 sub-brokers - today there are 27 brokers and 4 sub-brokers - of which 25 are wholly or partially owned by foreigners. So we only have 6 pure Thai broking houses left – an mortality rate of almost 92%!!!
Poor business practices, and in many cases dishonest practices, caused many brokers' downfall - and as we can see with the impending commission liberalization, even the remaining brokers are not ready to accept the realities of a changing business environment.
Brokers could have led the way in educating the Thai population - but they didn't. Thais as a whole think that a company only gets listed for two reasons : a) prestige, b) for the owners to cash out at huge multiples. These are the findings of the Boston Consulting Group. As far as local market participants are concerned - they are punters, not investors. There I agree with you. It is sad that so much time has been lost.
Just to be defensive, we are a little bit more "fundamental" than others - that is due to the fact that most of our business is institutional. So, our most traded shares are BEC, PTTEP, BANPU, SCCC, GRAMMY, DELTA, ADVANC, HANA, KCE. Stocks like that - but we do have buys on some value stocks - KWH, RCL, PSL, BAT-3K etc.***
Best Personal Regards to all Subscribers,Paul A. Renaud.
