SET-listed, state enterprise Airports of Thailand drew shades of the 1997 economic crisis this week by asking Kasikorn Securities to withdraw an unfavourable analysis on AOT’s stock and calling in the author for clarification.
The move by AOT, one of the country’s largest listed market capitalization firms with a market value of more than 707 billion baht, came to the spotlight when it issued a statement late on Wednesday that asked Kasikorn Securities to rescind a research report which had argued that the accommodating moves made by the AOT toward King Power would cost the company up to 130 billion baht. (Read here for more)
The moves by AOT to call the analyst concerned and ‘explain the facts’ followed by a public statement that the analyst was wrong (read here) drew shades of 1997 when as many as 4 foreign brokers saw their offices raided by authorities after the brokers had come out with reports which suggested that the Thai baht, which was pegged to the US Dollar, would not withstand market mechanisms.
The Thai baht finally bucked under the market pressure on July 2, 1997 after the Bank of Thailand had depleted nearly its entire reserves trying to defend the unrealistic peg to the US greenback.
The move by the AOT to get the report withdrawn and the calling in of the responsible analyst has raised questions in the analyst community over the level of independence they have in recommending their clients on what they should and should not buy.
Background
Kasikorn Securities had earlier this week changed its recommendation of AOT’s stock from buy to sell, citing the coronavirus pandemic and AOT’s decision to prop up privately-owned duty free conglomerate King Power.
The decision by the majority state-owned AOT to essentially subsidize King Power through the economic downturn brought on by the pandemic drew eyebrows in Thailand, with questions thrown at the close relationship between the ownership of King Power and the government of Prayut Chan-o-cha.
AOT sought to distance themselves from the allegation by releasing the earlier mentioned press release clarifying its decision to help King Power and its opposition to the Kasikorn’s analysis.
Unprecedented move
AOT refused to comment to Thai Enquirer but said it stood by its press release. Kasikorn Securities also said it would not comment on the issue even though the report has since been withdrawn.
However, industry insiders say it is almost unheard for companies to act in such a manner and in such a public way.
“If companies have a problem with an analysis or with some factual information they can usually call the securities firm and clarify,” said a managing director at a securities firm in Bangkok who asked not to be named. “But you never make it this public and you never act like a wounded government ministry especially when you’re state owned.”
Paiboon Nalinthrangkurn, head of Thailand’s Investment Analyst Association (IAA) told Thai Enquirer that while he was unaware of the specific issue, companies do have the right to point out when reports have factual errors.
“Companies can call firms to clarify factual errors,” Paiboon said. “Sometimes the analyst doesn’t have all the information and if I were an analyst, I would appreciate the chance to find out the whole picture.”
“Companies can also disagree with a forecast, but the analyst should be under no pressure to change their findings if they stand by their original forecast,” Paiboon said.
Both the AOT and King Power have experience unprecedented losses in recent months due to the pandemic, with both companies heavily reliant on incoming tourists from abroad.
Thailand has effectively shut its air space since late April to curb the spread of Covid-19.
