The Thai SEC is shaking up the brokers.
The Thai SEC mandates local broker changes.
Good news published in the Bangkok Post as it appears the Thai SEC knows all too well the mediocre practices here by brokers for years on and why this just has to change now. Here below is part of there mandate:
"Under the SEC proposal, brokers will be required to maintain coverage for at least 30 listed securities. If a broker's market share is less than 0.5% of total market trade, its coverage requirement will fall to just 15 companies, of which at least one-quarter must be large-cap companies in the SET100 index. [Read 3/4 must be smaller cap stocks]
"On the other hand, brokers with a market share of 3% to 5% of trade [market share] will be required to maintain coverage of at least 50 companies, a requirement that rises to 75 for firms with a market share of 5.01% to 10% and 100 for firms with a market share above 10%."
You can see the full article here:
http://www.bangkokpost.com/business/economics/287693/sec-agrees-on-reforms
Just a final follow up...
About half of you in the member survey stated I should just let it be and drop my broker frustration/advocated changes on this. "The Thai’s don’t react well to criticism.." or, "I am just wasting my time". The other half of you felt it was worth at least pointing these out and felicitated my effort in rocking the boat a bit. Yet, yes all of you want more actionable good stock ideas, yeap all agreed to that; and maybe some missed this: but these two just go hand in hand.
Regardless if these want it or not, Thai Brokers just must bring us more research on undervalued secondary companies and re-invent themselves some so to attract the majority which now do not dare to invest in the SET.
Below is how I answered one original member whom kindly suggested I consider backing off on this topic. I’ve said enough about all that here is just a final follow up:
"Remember, I am not Thai, and unlike some other foreigners here I do not speak much Thai language; I run things on an international standard and tell this to every company/broker I meet up with! As, I told DEMCO and other firms I visit: if you mislead me I will point this out at my leading web site. While sensitive to the culture and its ways, I don't adhere to all the nuances....I had a very international upbringing and always tried to incorporate the good of a culture while ignoring the bad besides the silly. While I don't seek/look out for bad local professional practices, I will continue to point such out, if I run into them by accident.
"Do realize few of you have/are been a professional broker (not you, not Andrew S. not Dr. Nivet etc..). Hence non-broker investors may find some practices "not so ok, but not too worry too much about", but in fact these are much frowned about to any professional in this business.
"Account churning for example is an extremely serious offense in this business and yet most non- pro's say "oh well can't blame the mkt. officer for wanting to make a living". Would a pharmacist just sell any drugs/pills to anybody because "oh well can't blame him for wanting to make a living"? Would a professional accountant just allow anything to go on a balance sheet, just because the client wants this so? Would a good dive master allow a diver to go diving, even if its not up to par, just because he wants to have a new scuba diving client?"
"Also, I am more then just interested in making profits on the SET. There has to be more in life then just monetary enrichment. I have a high moral/ethical standard which I adhere to and if it was not for people who care, the world would be an even worse place. Unlike Dr. Nivet and Andrew S. and most others, I want/will contribute to this profession and try to make it a better place while helping all those good individual people we see hopelessly wondering around the SET broker traps, or SET investor seminars."
Here is the proven mantra but maybe forgotten: Companies which make their clients successful are themselves then successful, this is especially true in our business. The lack on this is the core reason so many don't invest in the SET. Meagerly so, the brokers here are far from there and nobody dares to say so, nor care. Or, as other high profile pro’s have stated:
"No matter what industry they are in, companies live or die based on trust, and if a company breaks that trust too many times, customers will just walk away. Customers will not buy [or invest] what they do not understand." Judith Hurwitz CEO of Hurwitz Group Inc.
Here is what I wrote to the BKK Post today on that. Now we can watch and see if things finally change for the better.
To the Bangkok Post Editor.
Regarding you Business Post article today titled: "SEC agrees on reforms Full steam ahead with market liberalization"
Congratulations to Thai SEC secretary-general Dr.Vorapol Socatiyanurak for moving forward to improve the local brokerage industry and so investors.
For too long -and increasingly so- brokers here have catered mostly to traders and institutional investors by focusing their company research heavily on larger stocks -and this regardless of attractive stock valuation on secondary smaller capitalized listed companies. Its been reported that of the over 460 listed companies on the SET/MAI brokers publish research on well less then 1/3 of these. The fundamental company research they do publish pays too much attention on large companies which they indirectly then allude is suitable to all investors.
More then 75% of Thai economic activity is generated by smaller and mid sized firms which are often all but ignored by the brokers. Yet many of these yield twice the annual dividend returns and command half the p/e valuations as compared to large cap.stocks. On average such companies also grow faster then large more mature companies. These so are of high interest to rational individual retail investors -yet basic fundamental research remains scant.
Responsible & profitable stock market investing over time requires information on companies beyond just large stocks, graphs, or 3 line write ups on smaller sized firms. This so to empower individuals in having confidence to rationally invest for dividends and long term capital gains. Mostly ignoring these goes against all norms of conscientious retail investing. Retail investors, us 99%, simply do not have the same large liquidity requirement institutions -or traders have.
Retail investor participation would be enhanced and grow if we have more information on such companies and this is what the SEC is now mandating. It would also lift the valuation, and so lower the cost of capital of smaller firms, which are the backbone of Thailand. Last but not least, because of the long broker neglect so many smaller cap. firms here remain largely undervalued as compared to large ones and so are often investor bargains which go begging.
Mandating brokers by size to provide research on these secondary shares is a long over due move in the right direction
Paul A.Renaud.
www.thaistocks.com
