Long Term Charts of the Thai Stock Market (SET) - July 2013 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 Forums.

Time for another bi-annual update of the long term charts of the SET (Stock Exchange of Thailand).

As usual, the first chart is the SET index between 1975 and now. This index now stands at about 1480, so a little higher than six month ago (1440), but this still results from a correction after the index reached 1600, which led it to fall as low as 1362, so sentiment may have changed.



The PER stands at 16.5, a level still high but better than the 18 we got 6 months ago, and since the SET is about at the small level, this is the result of better earnings. Such PER is still fairly high for the Thai stock market, so there may not be much value at this level.


The price to book value is about the same at 2.3 (vs 2.4) which, again, does not make the Thai stock market a bargain.


To conclude, I still consider the Thai stock market to be somewhat overvalued at an historical level, as well as compared to some other stocks markets around the world such as Europe, Russian, or Vietnam. The dividend yield is still around 3% which is about the same as what you get for a 15 Months fixed deposit. Interestingly, the 15-month deposit is 3%, 24- and 36-month deposit 2.625%, and 10-month 2.75%, which could imply banks may expect some economic troubles within 2 to 3 years.

Rick Rule Sprott - Most Junior Gold Mining Stocks are Worthless

VisionVictory has a very interesting interview with Rick Rule of Sprott USA, where he discuses his outlook on gold and gold stocks, water, the stock market as a whole, the economy (US debt) and finally junior gold mining stocks.

This is that last part that is very important to investors. He explains that If you put together the 400 junior gold mining companies, in a good year they would lose 2 billion dollars, in a bad year 8 billions dollars. So he sees no value in this market, unless you are a very good stock picker as the top 10-15% will thrive, whereas 80% will go to their intrinsic value: 0. Rick expects this market (where you can be invested in via ETF such as GDXJ) will stay in a consolidation phase for around 18 months more, while the weaker players (the majority) go bankrupt.

FYI, Marc Faber has the same view on  junior gold mining stocks.

Watch the whole video, it's very informative.

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.

Anonymous Analytics Uncovers Huabao (0336.HK) Alleged Pump & Dump Scam

Last time around, Anonymous Analytics found that Chaoda Moderm (0682.HK) may have lied about their assets and since then, the company stock 0682.hk (listed in Hong Kong) has been suspended.

Today, they have released a new report on another stock listed in Hong Kong: Huabao International Holdings Ltd (0336.HK), a flavor & fragrance (F&F) and Tobacco company. They view the company as "a pump and dump scheme with the primary objective of enriching its Chairwoman, Chu Lam Yiu and her proxies at the expense of shareholders. Since the inception of Huabao, Ms. Chu has sold nearly US$1.2 billion in stock, bringing her ownership of the Company from 97.6% to 37.7%"

In the 44-page report, the research team reviewed Huabao’s backdoor listing, its history of related party transactions, massive insider selling, and suspiciously strong financial metrics.

They found the company has a much higher profit margin than peers (close to 75% vs 40 to 50 %) which is not an issue in itself, but may raise eyebrows. The disturbing part is that AA contacted their alleged customers and many claimed they did not do business with Huabao or even did not know the company.

One "funny" part (except for investors in the company) is the way they altered the picture of one of their facility in Africa to make it look much larger than it actually is.

And that's not the only place AA found where management has grossly exagerated the scale of their operations as the multi-billion US dollars R&D center in Germany with at most 12 staff.

The history of the company shows a fair amount of resignation of key manager as well as audit companies.

Their conclusion is that "management is materially overstating Huabao’s earning power. The genesis of this overstatement was the Chemactive acquisition dating back to 2007, when management reported a questionable explosion in gross margins."

There is much more in-depth analysis in the report which is available at http://anonanalytics.com/pdf/Huabao.pdf.

Investing in individual stock can be very risky, it is safer to either buy stocks in a (large) basket of companies if you have enough capital or more simply invest with ETF or mutual funds.

Long Term Charts of the Thai Stock Market (SET) - January 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's our bi-annual update for the long term charts of the Thai stock market.

The chart below is the SET index between 1975 and January 2012, it has fallen sharply after July before rebounding and now stands at 1058.66.

The PER went from 14.5 to 12 in the last six months, due to the correction and earnings improvements. This kind of PER is neutral if we compare it to the PE history of the Thai SET. Six months ago, I expected a correction due to the relatively high PE which occurred and now I'm neither bullish not bearish based on this metric.

The price to book value went down to 1.87 (vs 2.14 in July) which makes Thai stocks slightly more attractive compared to 6 months ago.

To conclude, I believe the Thai stock market is fairly valued at those levels and the average dividend yield is 3.72% (vs 2.92% 6 months ago) which is comparable to what you can get in a fixed deposit (Bangkok Bank now offers up to 3.5 % p.a for a 36 months fixed deposit). I would neither by buyer or seller. However, if your investments are concentrated in US and/or European economies, you may still consider buying Thai stocks as Emerging economies become less reliant on Western economies (although there is no complete decoupling just yet) and Thai banks have virtually no exposure to European debts which make them more resilient should a recession occur in western economies this year.

Marc Faber: Equities better than Bonds

Great 30 minutes interview of Marc Faber on Bloomberg Radio on the 26th of November 2011.

They discuss about government debts, equities, gold, the global economy and politics.

Some random quotes:

• "I would rather buy Italian government debt at 7% than US treasuries at 2%".
• "The best would be to break up the Eurozone ..with local currencies and the Euro co-exisiting..."
• "You're better off investing in equities rather than in bonds or cash over the next 10 years"
• "It's beautiful, wherever you look there are problems..."
• "I'm very concerned about the slowdown in China"
• "I own some companies like Hang Seng Bank and Sun Hung Kai Properties" and he doesn't invest directly in Chinese companies.
• "I'm fully prepared to have less money over the next years" (due to higher taxes).
  
• "It's my biggest worry, that eventually we'll have war".
• "People that have deposit in the bank may lose money, who knows" in reference to MF Global and other companies that play with clients' money.
• "Nothing will be done, the entitlement will continue, the government finance will continue to deteriorate and one day the government will go bust. Before that they'll print money..."

Long Term Charts of the Thai Stock Market (SET)

This article showing the long term charts of the SET Index, price earning ratio and price to book value was originally posted on CNX Translation Forum.

The chart below is the SET index between 1975 and August 2011, it has continued to rise albeit at a slower pace.
However, the PER was stable around 15 as the companies earning improved. A PER of 15 is relatively high for the Thai stock market.


The price to book value of the SET index increased slightly to 2.14 (from 2) back to 2007 levels and not really historically cheap.


Finally, the average dividend yield is now 3.45%, but you can get the same amount of interest in a fixed deposit in Bangkok Bank (3.5% per year for 3 year fixed deposit).

To conclude, for those who are invested in the Thai SET is may be wise to further lighten your positions given the current market valuations.

Invest in Vietnam with ETF

Vietnam is one of few (only?) countries in the emerging market which currency value went down vis-a-vis developed market currencies such as the US Dollar or the Euro (Cf. 10 year EUD VND Chart below- Source: xe.com).



They have also devalued their currency recently by 8.5% due to rampant inflation (20%) and already high (but still negative) interest rates (15.9%). They have also raised their interest rates, increase the electricity rates and the stock market tanked following those bad news.

Marc Faber also recommended investing in Vietnam at the end of last year.

I found 2 ETF to do so. One is available in the US market: Market Vectors Vietnam ETF (VNM) and the other in Hong Kong: X DBFTSEVIET (3087.HK).

The graph below charts the vietnam stock market (red), VNM ETF(green) and 3087:HK (orange) since the ETF are available (July 2010).




Bear in mind that the ETF are in US and HKD (linked currency) but the Ho Chi Min index is expressed in Vietnamese Dong, so adjusting for currency fluctuations shows that 3087:HK tracks the Vietnam stock market closer, but VNM outperforms both the Ho Chi Min index and the Hong Kong ETF.

I am not sure about the reason for this difference, but this is not because of the expense ratio (VNM: 0.76% vs 3087:HK: 0.85%) or premium (VNM: 2.404% vs 3087:HK: 1.129%)