Expiry of SET uptick rule will have big impact on investors: expert
An analyst at Trinity Securities says investors should switch focus to small- and mid-cap stocks since the price of large-cap stocks would fall after the uptick rule expires on October 1.
The Stock Exchange of Thailand (SET) and Thailand Futures Exchange announced the uptick rule, which stipulates that members can only short-sell stocks at a price higher than the previous trading price, will be scrapped on October 1. The new “zero-plus” tick rule will allow investors to short-sell stocks at a price equal to the trading price.
Also, the ceiling and floor prices of stocks will be restored to 30 per cent on October 1.
Nuttachart Mekmasin, assistant managing director at Trinity Securities, expects the value of short sales to rise over Bt1 billion again due to higher liquidity and high stock valuation.
"Short sales will cause the SET to fall below 1,200 points because the index will move in line with [market] reality after the uptick rule that supports the index expires," he said.
He predicted the SET would not rise back above 1,300 points, while shares on the large-cap dominated SET100 would be hit by short-selling.
"After the zero-plus tick rule and ceiling and floor adjustment come into effect, positive and negative sentiments will have more impact on the SET, while the index will fall in October or November according to listed companies' third-quarter performance and the result of the US presidential election," he said.
He expected SET100 stocks to perform worse than stocks in other indices due to mass selloffs in large-cap stocks and high valuation.
Small- and mid-cap stocks – especially those traded in the Market for Alternative Investment (MAI) and sSET – would generate better returns than large-cap stocks, he predicted.
As of September 18, the annual price return and total return index (TRI) from the SET and sSET had fallen, but the MAI price return and TRI had risen by 0.30 and 3.69 per cent respectively, he noted
During this year’s third quarter, the five stocks registering highest short sales are Kasikorn Bank (KBANK and KBANK-R) at Bt2.36 billion, Airports of Thailand (AOT) at Bt2.04 billion, CP All (CPALL) at Bt1.45 billion, PTT at Bt1.35 billion, and Minor International (MINT) at Bt1.07 billion.
