SET capitulation at last is happening.

SET capitulation at last is now happening.

Last week was an important inflection point on the SET in my view.  Happy to see -and as here predicted for some time- to now observe in real time the "big bad bear caps." finally being taken to the slaughter-house.  For many months DELTA/GULF were the regular shares traded most active Baht volume leaders. And this for or a long time -which means huge amount of more speculative-money has just been lost.  As to any casual investor observation, both were (and still are) overpriced.  I call it a "washing/clearing", capitulation is now at last starting to set-in, and so it likely signals we are nearing a major market bottom here.  Despite their near double-digit sell off last week, both of these combined, still trade at a gigantic p/e averaging 50, or 3 times more then the SET average mkt. p/e.    

Monopolies and Oligopolies are a long proven drag on market oriented economies. They also nurture inflationary tendencies in that they unfairly command firmer prices then mkt. clearing prices -this as compared to a more competitive driven economy.  In my view, this along with unsustainable consumer debt (in part driven by predatory lending practices here which nobody talks about), are the key dragging points to any sustainable Thai economic recovery.

For these reasons and more I clearly here have viewed for some time, to favor stocks which are either removed from that drag, or actually benefit from it.  TOG (Thai Optical Group, 11.40) being the pure exporter in a semi-defensive industry/product. While AUCT (Union Auction, 9.80) being the domestic play on the high and worrying Thai consumer-debt theme. As AUCT is Thailand's leading & highly successful car/motorcycle on-line auctioneer of mostly repossessed vehicles.  Of course, there are other select attractive investor choices which rise above the otherwise bearish SET mkt, all year long.  AUCT has held its own while TOG has risen some 35% year to date plus handsome dividends, yes despite the big SET mkt. correction. Both combined yield around 5% in cash dividends at current mkt. prices -or 8-9 times more then Thai bank saving accounts interest payments. Both combined, have a lower trailing p/e ratio then the SET mkt. averages, while earnings wise growing faster.

Paul A. Renaud.
www.thaistocks.com