SET, SEC watch for overheating
The Stock Exchange of Thailand has discussed with the Securities and Exchange Commission ways to control overheating of stock prices and their irregular movement, and the rapid gains of initial-public-offering shares of listed companies, particularly smal
Prapan Charoenprawatt, SET senior vice president and president of the Market for Alternative Investment (MAI), said the discussion focused on possible ways to oversee stocks with irregular movement. Personally, he said that if stock prices continue to move up sharply, there could be additional measures to combat their overheating.
"The existing measures are proper, but if the overheating does not cease or cool down, we may launch additional control measures," Prapan said.
In the MAI, of 27 loss-making companies investigated, more than half changed their business on expectation of recovery.
"We want to warn investors to be cautious about investing in overheating stocks, given the risk of possible damage," Prapan said.
He also cited market expectations of companies’ performance for such sharp increases after IPOs, particularly those of small firms.
"We are waiting to see whether a big cap like Bangkok Airways, which will start trading in November, will be overheating. This will be an indicator of overheating of IPO stocks," Prapan said.
Responding to an observation about the improper setting of IPO prices, which could lead to irregular movement, he explained that the IPO price would normally be determined by calculating the company’s performance for four consecutive quarters and comparing the price-to-earnings ratios among companies in the same industry or the market P/E ratio. A price discount of 20-30 per cent is offered to investors.
A sharp rise in IPO prices may occur because of discounts to investors and there may not necessarily be any irregularities, he said.
Making its debut on the MAI yesterday, the stock price of Rayong Wire Industries soared to Bt4.80, 200 per cent above the IPO price of Bt1.60. The stock closed the day at Bt4.80.
Chenin Chen, managing director of RWI, which manufactures and sells wire products, cited its sound fundamentals and growth potential for the sharp rise in its stock price.
"Wire products are necessary for construction projects, and there is more investment coming, particularly from the public sector," he said.
Chenin expects RWI sales to |grow this year on the back of investment by both the public and private sectors.
