Long Term Charts - Thai Stock Market (Thai SET) Update - July 2020

It's been a long time since I've not provided an update to long term charts of the Thai stock market. More exactly over 5 years, because to be honest nothing much happened during those years, but we've got a bit more action this year, so it might be a good time to have another look.

The Thai stock market peaked at around 1,830 in February 2018, and it dropped to under 1,200 in March following the politician answers and lockdowns due to COVID-19. It's back to around 1,350 since them It was a sharp, but let's check more long term charts to find out more about valuations.

One metric is the price earning ratio, and never really went under 10 that historically is a buying opportunity. Getting to 5 or under would be a lifetime buying opportunity, but obviously it does not happen often. We should also expect earnings to drop significantly, and I'm not convinced they'll recoever that quickly so the PER should soon go higher, unless the average price of stocks in the Thai SET goes down as well.

The price to book value ratio is fairly affordable, so that's one metric where the Thai SET looks fair valued or even slightly inexpensive.

From the chart above, a dividend yield of just under 4% look attractive considering current interest rate on fixed deposits are under 1%. Buying large stocks for dividends might be a good way to be paid to wait with limited downside. That would remain true as long as dividends are not cut, and that's not guaranteed considering the environment we live in.

But no buying on my side for now, so I'll be patient, and since I expect the market to move again this year, I'll likely post an update in December.

All is Well! FAANG Stocks Hit All Times High as the Economy Collapses

The economy is in shamble with predictions of 20%+ drop in Q2 GDP and so far 22 million people filing for unemployment in the US in the last four weeks, but the market acts as if nothing happened with the NASDAQ positive for the year.

A lot of it as to do with the various government stimulus, FED balance sheet going through the roof, as well as more demand from companies providing services for the many "work from home" (WFH) workers due to lockdowns.

But if we look into the details it's not that pretty, as FAANG stocks are responsible for most of the rise. In other words, it's not a broad market rally, and many NASDAQ stocks are still way down.

From a historical perspective, most bear markets will have a bear market rally, as shown from the S&P 500 chart below between 1998 and 2020. Source: NorthmanTrader.

You could always say "but Dark Horse, 2020 won't be like the great depression, and instead, it's just like 1987, we had the "best economy ever" and it's all up from here after everybody goes back to work + FED put!". To that argument, I'd answer the market was not overextended in 1987 as shown by the market cap to GDP ratio aka "buffer indicator".

Before the crash in 1987, the market cap to GDP was just 64%, and now it's around 130% before dismissal GDP numbers are announced meaning it should be above the previous record soon.

I'm a big believer in mean reversion of things like market cap to GDP and PER ratio / CAPE ratio. We previously wrote how many markets were overvalued including the US markets, and GMO just released their quarterly update with their expectations of yearly returns for various markets over a 7-year period.

That means large US stocks may lose around 1.5% a year over the next seven years, not a nice proposition especially when considering those numbers were after the correction in March 2020. Also note bonds don't look to be a good place to hide either, but emerging value stocks have some good prospects, and we previously mentioned that Chinese commodity producers may be a place to look for investment opportunities.

I'd still stay very prudent here as there are many risks around. We are quite surprised people expect a vaccine by 12 to 18 months, as we would like to remind our readers that some virus-induced diseases don't have a vaccine, think AIDS or dengue fever. The latter is even scarier because you don't develop immunity, and instead, the risk of death is greater the second time, and even more the third time. There have been reports that released COVID-19 patients have contracted the disease again, so herd immunity is not even a given, but so far there's no indication that the second infection is nastier like for dengue fever.

Stay safe! We live in scary times for our health, finances, and freedom from governments.

Long Term Charts Thai Stock Market - January 2013 Update

This is a repost of the article found on CNX Translation forums.

6 months have gone since our last update, and its time again to update the long term charts of the Thai stock market.

The first chart is the SET index between 1975 and January 2013. Following other indices around the world, and despite my overvaluation view 6 months ago, the Thai stock market has continued its (unstoppable) rise in the last 6 months, and now stands at about 1440, a rise of about 40% since I started to become cautious.



The PER is now around 18, mainly due to the stock market improvement. At 15, I started to be bearish, so at 18 it's extremely unusual for the Thai stock market. So either earnings have to go up substantially, either the stock market has to plunge, or a combination of the two.


The price to book value slowly crept up to 2.4 which also starts to make Thai stocks overvalued, especially compared to what you get in other markets around the world. (European stocks have a P/B ratio 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 around 3% which is is that more than can get in a fixed deposit (Bangkok Bank now offers up to 2.65 % p.a for a 36 months fixed deposit), so why take the risk? There is also a lot of optimism around the world, which IMHO is not warranted, so I would not be surprised to see a massive correction in the Thai stock market within the next year.