Saturday, July 21, 2012

Long Term Charts of the Thai Stock Market (SET) - July 2012 Update

This article is the bi-annual update of the long term charts of the SET Index, price earning ratio and price to book value posted on CNX Translation Forum.

Here we go again with our bi-annual update for the long term charts of the Thai stock market.

The chart below is the SET index between 1975 and July 2012. To my surprise, the Thai stock market has gone up sharply in the last 6 months, despite the European crisis and the slowdown in China and globally.

The PER has gone back up to around 15, mainly due to the stock market improvement, but also because of lower earnings. This metric make me bearish again, because when the Thai stock market has a PER above 15, it is usually not a good time to invest.

The price to book value went up to 2 which does not make Thai stocks really overvalued, but not cheap either. For reference, in Europe, the P/B ratio is around 1 now.

To conclude, I believe the Thai stock market is relatively overvalued both historically, and compared to other stocks markets around the world. The dividend yield is now 3.63% which is slightly higher than what you can get in a fixed deposit (Bangkok Bank now offers up to 3.25 % p.a for a 36 months fixed deposit). I also believe a recession has already hit western economies which may worsen later this year or in 2013, and we'll see a hard-landing in China, both of these events should affect the Thai stock, and I would not be surprised if we could see a 30% correction in the Thai stock market within the next 2 years.

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