A recent surge in global equity markets show that investors are perhaps ignoring the negative economic data released for the recently ended quarter.
For example, the S&P 500 Index, Nasdaq Index, Korea’s KOSPI Index, India’s NIFTY Index, Jakarta Composite Index, Taiwan TAIEX Index, and even Bursa Malaysia Index rose more than 4 per cent in July despite negative news on the economic front and global concerns over a second wave of pandemic infections.
Interestingly, the price of gold, which is often seen as indictor of risk aversion to other assets classes such as commodities, equities, bonds, etc, rose 11 per cent in the last month.
This points to the fact that global risk is rising.
The rise in equities and gold prices at same time is not common. There is little disagreement that the world economy is suffering and many companies are suffering which should lead to a fall in equity markets.
This confusion of rising equities prices amidst collapsing economic growth led us to dig deeper into what is causing some equity indices to rise. The findings produced an obvious conclusion that “investor expectations” of certain sectors mainly engaged in information technology (IT) and online entertainment are driving the markets up because the work from home phenomenon may have increased demand for their products and services.
Note that it is the exaggerated expectations and not the actual rise in their income.
For example, Apple reported net profit of 11.2 billion dollar for second quarter. This was slightly better than analyst estimates, but its share price rose almost 10 per cent on Friday to make it the world’s most valuable company.
The point to note here is that the quarterly profit was close to a 10-year quarterly average yet investors took the share price to an all time high. Results like these are pushing the indexes higher.
Thailand’s Stock Market
The narrative reads differently for Thailand as it does not have many IT companies with heavy representation in the SET. This partly explains why SET100 Index fell 3 per cent last month.
With the second quarter results being released over the next two weeks, the SET index may suffer as a slew of poor performance, and talk of dismal future, is priced in.
Let’s look at winners and loser in Thailand.
The SET100 Index with market capitalization of 10.9 trillion baht, which is 77 per cent of SET Index capitalization, has lost 18 per cent this year, or a loss of 420 points to date.
The 10 stocks with market capitalization of 368 billion baht or 33 per cent of index capitalization account for 55 per cent of total fall. These stocks with their year-to-date (YTD) performance in bracket are AOT (-30 per cent), SCB (-45 per cent), KBANK (-46 per cent), PTTEP (-27 per cent), PTT (-11 per cent), BBL (-37 per cent), KTB (-39 per cent), MINT (-49 per cent), ADVANC (-13 per cent) , and TMB (-43 per cent).
The winners, i.e. top 10 performing stocks this year, with market capitalization of 865 billion baht or mere 7.9 per cent of the SET100 Index’s capitalization contributed 8 points, or 9 per cent of the index change.
From the table below, you can see, only three names, CPF, CBG, and EA that have a market cap of above 100 billion baht. This is the main difference between Thailand and other markets, that Thailand is primarily an old economy market dependent on local consumption, exports, and tourism.
We look at these names except EA and GULF both of which require detailed discussion, to determined why they have performed so well, and if their performance can continue.
Stock Breakdown: JMT
Stock Breakdown: Tipco Asphalt
Stock Breakdown: COM7
Stock Breakdown: Siam Global
Stock Breakdown: TQM Corporation
Stock Breakdown: Sri Trang Agro
Stock Breakdown: Carabao Group (CBG)
Stock Breakdown: CP FOODS
