Securities houses told to name most active stocks in reports
SEC to ease investors' decision-making
The Securities and Exchange Commission has encouraged securities houses to prepare research reports on the 10 or 20 most active stocks to provide investors with sufficient information for their decision-making.
Vorapol Socatiyanurak, secretary-general of the SEC, said yesterday that the commission in collaboration with the Association of Thai Securities Companies (ASCO) urges each securities house to provide company reports on the 20 securities with the highest volumes traded by all customers and the 10 securities with the highest volumes traded by individual customers over the past week, in case the securities companies have not yet conducted full research on such securities. The ASCO’s regulation will take effect on June 1.
The move followed expectation of more fund flows into the stock market this year. Many medium- and small-cap stocks have seen an extraordinary surge in prices in the past months, prompting the Stock Exchange of Thailand to issue a stern warning to investors.
Recent spikes in the composite index drew retail investors. Their transactions now account for 60 per cent of daily market turnover, off from the recent 70-per-cent peak.
Company reports must contain useful data for investment decision-making, such as key financial ratios compared with peer companies. The reports will not provide any price recommendations. ASCO has been in talks with its members to finalise the report format before submitting it to the SEC for approval.
Recent trading statistics indicate that the investment of local retail investors was comparatively concentrated in the most active stocks with a high price-to-earnings (P/E) ratio as well as those facing cash balance requirements. Most of those stocks have not yet been covered by the securities companies’ research reports.
Year-to-date, securities trading accounts opened by new investors have surged. The preparation of company reports will provide retail investors with more information to analyse.
Brokerages will be required to prepare and distribute company reports on each security for at least three months. The report must be updated to reflect information likely to impact the security’s performance or price. If any security is subject to a company report for any four straight weeks, the securities company must promptly prepare a full research report.
“The research report is a crucial source of information to help investors decide which security is interesting and whether any particular security suits their investment needs,” Vorapol said.
Most of the research reports, however, cover only “in-the-spotlight” large-cap listed firms, while investment behaviour among certain investors has shifted to concentrate in high P/E and cash balance securities. The investors may not really know the issuing companies.
“The coverage of research reports should be extended beyond blue-chip and interesting securities to include high P/E and cash balance securities. This will provide investors with an opportunity to learn more useful information and make their investment decision based on fundamental factors,” he said.
