SET volatility down to lack of info, not enough institutional investors: Fetco

Speaking during an interview on Krungthep Thurakij TV’s “Market Wise” yesterday, Fetco chairman Paiboon Nalinthrangkurn said market irregularity over the past three to five months, with rises of 100-200 per cent in the prices of small and medium caps within very short periods, was largely down to insufficient information and an insufficient number of institutional investors in the stock market. “In the past three to five months, some [investors] have exploited market opportunities for price irregularities,” he said. 

Last Friday, the main SET (Stock Exchange of Thailand) Index and the SET50 both dropped 3 per cent, while small caps plunged 15-20 per cent and the Market for Alternative Investment fell 8 per cent.

“This clearly shows high speculation in small caps, about which there is no information [for investment],” and this is a structural problem for the market, said Paiboon, who is also chief executive officer of Tisco Securities. 

The SET, the Association of Thai Securities Companies and Fetco plan to hire third parties to increase the number of stocks on which there is analysis from the current 150 out of more than 500 listed companies in the SET, to 250.

Another structural problem is the low number of institutional investors, which share only 8 per cent of trading turnover. Small investors account for 60-70 per cent. 

“If institutional investors, like pension funds and provident funds, increase, the speculation mechanism will decline. Fetco, the SET and the Securities and Exchange Commission have been trying to promote this issue,” he said.

The Thai stock market remains bullish and this is a golden opportunity for the capital market’s development, he added.

“What happened on Friday taught us a lesson, but no repercussion is expected [from the speculation] as 80 per cent of stocks are big caps, unlike 15-16 years ago. Speculation has been focused on small caps. We are still in a bullish market," Paiboon said. 

MR Pridiyathorn Devakula, former governor of the Bank of Thailand, said in an interview on the “Inside Thailand” radio programme that the authorities could not take any measures amid the baht’s appreciation that might have an impact on the stock market. The currency is in any case not strengthening as much as before, he said.

The Monetary Policy Committee realises that the central bank must try to prevent too much appreciation without there being any impact on the bourse, he said, adding that the measures it takes, if any, will be used for capital inflows and debt instruments only.

In response to a question about the proper level of the baht, Pridiyathorn said that taking other currencies into consideration – and the Japanese yen is currently depreciating – the baht should not appreciate further, remaining at around 29 per US dollar.