In our earlier article, we looked at the overall reaction of The Stock exchange of Thailand SET Index (SET: IND) with regards to the ongoing coup in Thailand. Now let’s dive deeper into the index constituents to check if there’s any value to be found!

The devil is in the details!


Based on the SET Top 5 constituents (Apr 30, 2014 FTSE Factsheet), their P/E (TTM) as at May 23, 2014 did not appear to reflect doomsday valuations. A point to note would be that the top 10 constituents of the top 50 entities in Thailand occupy over 50% of the index by market capitalization. As mentioned in our earlier article, it would be good for one to understand what an index is made up of; for the case of SET, it appeared that the bulk of the top 10 constituents belonged in either the Financial or the Oil & Gas industries.

Judging solely from the returns of the past year, the decrease in the top 5 constituents’ respective market values did not seem to place these constituents at drastic levels. The writer would go out on a limb and opine that if a paradigm shift coup-type situation of this magnitude were to occur in any of the developed nations, the reactions could be relatively more severe.


Value is normally found in situations where fear grips the markets, leading to depressed valuations due to panic selling. But from the P/E valuations above, it doesn’t appear that the bulk of Thailand equities are priced at a doomsday scenario by any stretch of the imagination.

A similar compilation was done based on historical P/B valuations with the results similar to the conclusions derived from the P/E basis.

Just from the perspective of a P/E valuation, as at May 23, 2014 the SET index was actually priced at a 16.48% premium relative to its 10 year average!


Value In Action

Let’s hope that the “coup culture” in Thailand would finally be resolved and not escalate towards an Arab Spring-type of situation. The Arab Spring is a revolutionary wave of demonstration and protests, riots and civil war in the Arab world that began in 2010.

Political stability goes a long way in one’s investment consideration. If you can’t even be confident that your investment is safe, maybe you might want to consider an alternative opportunity.

Based on the current valuations of the sample size above and a historical P/E basis, the writer was of the opinion that the SET Index as a whole did not appear to be priced at a screaming discount at the moment. The writer does not imply that there isn’t any value at all; rather one might do better to seek out lower hanging fruits rather than try to predict the unpredictable especially a potentially long drawn out situation  largely dependent on the political environment of the country. This was mentioned in our recent article by Stanley with regards to the ongoing situation involving Malaysian Airline Systems Bhd (MAS:MK).

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Cheong Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Cheong Mun Hong doesn’t own shares in any companies mentioned above.

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