The Thai stock market is at crossroads.

PaulRen's picture

Major crossroads in the Thai stock market.  Will the status quo maintain and get ever more so entrenched? Or, are we at an important inflection point? Politics will likely set the tone.  (This first publishing this article -we all see what evolved since July 19th).

Many of us are familiar with the medical reality of good and bad bacteria in humans’ (and animals) stomachs and guts. Some of these are good and some bad. The bad can do some good in the right combination, as long as they don’t proliferate out of control, i.e get way out of balance.  If they do bad digestion, disease, and more medical dire troubles emerge some which can be very serious in time to a point of outright failure.

Similar with speculators in a stock market!  Some of this activity is good as it provides liquidity and dept in markets; even while at times it distorts such. Some can be good -as it gives rational investors then the chance to sell overvalued stocks into euphoria high prices or, alternatively invest in oversold ones’, at bargain levels.

The increasing risk however now with Thai stocks is that the prevalent more dominant speculative aspects of the SET get out of control -and the bad takes over the good and so in time “bad money chases out good”.  A 250 year long proven economist theory -and reality.  An organism fails, just like markets do, if it increasingly and in a ill-nurtured way things gets out of  balance.  I dare to say post 33 years of SET observation and following -its been getting there -if not already so.

In recent years in my view the SET/SEC has increasingly been too regulatory lame, so speculators along with many brokers sanctioning these more and more dominant hyper activities.  Most here so now increasingly view the Thai stock market a place to gamble and “play”,  vs. invest with a long term sustainable & rational wealth creation theme.  Bad bacteria have taken over and along chasing out the good.  

If Thai politics presently now not change for the better I predict this will become increasingly entrenched and indirectly nourished in part by ever more powerfull oligopolies* , along with the ever more dominant speculators which will like bad bacteria in an organism create malfunction and in time disease -and worse.  This is the real culprit few talk about.

Now there are some which may think “let it be” as an astute investor can take advantage of these ever more abnormalities. The problem is that more rational institutional large pools of capital, both foreign and domestic along with thousands of more rational investors, will likely shy such devilish unpredictable and irrational markets. As these count-on that in the longer term a balancing along with levelheadedness prevails.  Vs. a cowboy mkt., dominated by a few big punters which damage the reputation along with regulatory abuses or worse, as we have seen of late.  The other big issue of course is that so called disintermediation of savings gets hugely “out of whack”, where allocation of capital is immensely and ever more so, inefficiently allocated.

It is this reality which if it persists or gets worse as I now fear, make me as a long responsible investor here very concerned and so express the viewpoint that if things going forward don’t change for the better, I’d rather abstain.

Best Regards,

Paul A. Renaud. -since 1997.
*  An oligopoly is when a few companies exert significant control over a given market. Together, these companies may control prices by colluding with each other, ultimately providing uncompetitive prices in the market.