CHO in doldrums, like so many.

paulren's picture
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CHO is an example and there are so many more like this.

There is a long and short answer for why CHO, as just one example, has seen such poor price deterioration.   I've explained this horror in various macro ways at my site before, while it seems nobody else does, nor wants to.  The broker and other so called gurus in the newspapers and elsewhere always blame the China/USA trade ware, at nauseam.  How to these gnomes reconsiatte the below as there so many like this and since 2015, interest rates have only dropped more. The level of interest rates in an economy always is a key -but not only- determinant of property and stock market valuations, this is obvious and can be proven in finance both in theory and practice.

Thailand's stock market is in the doldrums for some time, the country is stuck in the middle income trap and the broker industry exasperated it.  While the big cap SET indexes do not show this, many if not most secondary shares have lost half their value or more, since this Government took over in 2014.  This is never reported, but just keep looking at indexes/graphs like the MAI or sSET over the past 5 years.  While the US market is setting new highs, Thailand likes to blame its own market stagnation on always claiming and blaming the USA/CHINA trade war.  Even while its not clear Thailand is suffering much on this.  Is there not a dichotomy in this? I think so.  It tells you about denial.

CHO (0.75) as just one example has still many different good things going and remains profitable, yet its stock price just now  isat 0.75  Baht, or trading at less then 1/5 it did back in 2014-2015 when it hoovered around 4 - 5.50 Baht. 

Yet, this year CHO will likely earn more per share and in total net profits then it did back in those days.   For the first six months of 2019 CHO earned 0.03 Baht per share, or 38 mill. Baht, this vs in 2015 it earned 35.7 mill Baht or 0.03 Baht per share, yes for all of year 2015!   Its net profit margin of late is reported at 3.64% vs. barely 3% in 2015.  Back in those days it did pay a small dividend vs. currently it omitted its dividend due to large project like the Bangkok Bus NGV, which granted was allot of headaches and from the look of things never materialized in a big windfall.  I think a dividend resumption is very likely for this year.  Still how can it be that CHO will likely earn more this year then it did back in 2015, yet it stock price has dropped 80%!

What is one to deduce from this, as CHO is far from alone in this.  My take is, and I realize this is a simplification:  1) individual local stock investors the prime buyers/sellers of such secondary stocks have exited in droves and the key reason in my view is the failed broker industry (a whole separate discussion) the second key reason is Thailand has entered the middle income trap -yet is in denial, while few see how it will exit this anytime soon due to so many reasons.  Just shows the value destruction which has silently occurred in the Thai stock market ever since the current govt. took over. Realize some 2/3 of the Thai economy is made exactly by these kind of secondary shares.

Some suffered tremendously on this while I wrote about this overall malaise for some time...and tried hard to have the BKK post publish my letters. Which they did 1 or 2.  The only consolation is the strong Baht currency.  I am just hanging in there but luckily have other things going (you all know what).   At for 22 years, always wrote/stated over all these years many times to take profit and invest in something else -if any stock rises more then 50%.  This prescription of sort has for many been a savior, evenwhihle the rest is outright depressing.

Best Regards,

Paul A. Renaud.