Retail investors all but abandoning the Thai Stock exchange. Why?

PaulRen's picture

Why are Thai Retail investors all but abandoning the Thai Stock exchange?  I know why.

I've been asked multiple times why in my long experienced opinion are Thai retail investors fleeing the Thai stock exchange ever more. When, as opposed, in the long past they made up bulk of trading volume here.  See the link where you can monitor SET investors, by actual type of investor:

When I first got going in Thai stocks, Thai retail investors made up some 75% of average daily volume.  This in recent times just continuously dropped (with a brief retreat during Covit-19).  Year to date its now stands around 31%,  but in December dropped below 30, to now just 29% of total trading volume.  This is very concerning, while rarely address, I would think as it much dents the ability of Thais with some investor capital to partake in returns over time, higher then the meager 0.5% paid on Thai Bank interest rates. Why is that?

I think many of us already know the reasons, here I point out some of the dominant ones:

--Thai brokers mostly even while indirectly just promote trading, vs. investing.  Trading without stop-losses is never advised, yet the SET still does not officially offer so called automatic stop loss orders.  Novel investors (most people) are by nature not good in trading -and many, many studies show such traders loose money -over time.  Just one reason for this, is that they sell out their winners while then hold on to their losers which means in time a portfolio of losers prevails. Its one of the classic pitfalls, but rarely explained/concerned by marketing officers.  Mkt. officers here instead are overly concerned with trading for commissions, vs. new wealth creation for their customers.  Imagine a Medical Doctor which is far more interested in pumping medicines and return visits for fees, vs. getting the patient healthy again.  Not good!--

--Thai brokers publish glaring/glossy research reports -but rarely explain what the company actually does and why it has a great product/or service. This is an inducement to trade vs. ownership for investment. Some of these reports are not objective -or worse can have a conflict of interest.  Further, using words like "play of the day" or surely will go up etc.. are all terms which are used, but should be frowned upon.  Broker-managers in my view have allot to be desired, but still seem lame in recognizing the problem.--

--The Thai SEC/SET are overall just "lame-duck" in actually punishing security or broker violations, like insider trading where nobody is seen going to jail.  Some of these are very serious violations which must be punished, beyond just reprimanded.  Imagine your playing cards with a group where some there are cheating, would you stay at this card game!?  The SET/SEC, after years of pointing out this dire weakness, still has the handicap that mostly the Thai police must press/prosecute such violations, which they are just not qualified to do...and while also can have a conflict of interest.

--Its been a recent practice for some listed companies here when issuing warrants to not allow foreign retail investor to get their free entitled warrants, even while they have a correct Thai address.  See for just one example DEMCO, which issued new free warrants just a few months ago, but then barred any foreigner to get them.  Again, despite having a Thai address.  An outright galling practice we can only hope is a practice to be abhorred as its beyond mind boggling.

--Frequency trading and or around derivative warrants, too dominant and distorting the market. Especially when so often the most active SET stocks are to any casual observer, way overvalued.  And while these at time selectively do not get signaled out like "Cash balance only."

--A long new IPO overpricing practice here. Where the first few opening days speculative activity on any new IPO, "saves the day", only to later so often dwindle in mkt. price, disappointing legitimate investors.  Neither the SET nor the brokers, as I have often complained, publish any post-performance stat's on how Thai IPO's actually scored,  say 3, 6, and 12 months later.  Overpricing IPO's of late has mostly come to a dire end due to the on going bear market -as the few IPO's coming recently do drop the very first day.  The result of this ill previous practice -for too long.  But perhaps this is now changing for the better?  where new IPO's may be more reasonably priced vs. much overpriced for long in the past.  IPO's in general should in fact be slightly under-priced compared to existing trading companies in similar industries.  This so to allow new IPO subscribers for a legitimate chance on making some gains, while taking risks.  Here,  for long it seems to have been just the opposite.  Point being, one wants new IPO shareholders to sit on some instant legit. gains and feel good about the new company they just subscribed to, vs right from the start have an ill-feeling by having been taken, yes by on overpricing cherished by Investment Bankers removed from critique sitting in their high towers.

Here above is just a short list, not meant to be exhaustive.  Point being that any stock market is soo much about trust and excellence in dealings, besides regulatory enforcement beyond just stated rules, often sidelined.  When this lacks and getting worse, people look elsewhere and now unlike in the long past, write about their bad experiences in reviews and on-line chatter.

Paul A. Renaud.