SET50 vs Thai economy

[RotBenz8888]

Thailand has developed significantly over the past 20+ years, with a growing middle class. At least on the surface, in Bangkok and provinces, it appears to be an enormous growth of people with expensive condos, houses, cars and spendings in shopping malls etc. But the SET50 hasn't gone anywhere since 1996. Any economist who'd like to explain how that is that possible?

[Celsius]

1997 property bubble

[Mike Lister]

Equity markets like the SET are a forward view of the economy, selected companies have grown but most have flatlined. Pockets of private wealth exist but wealth across the board has remained flat, if not fallen. The Thai economy is dependent on two things, customs or goods exports which represents about 60% of GDP, and, international tourism which represents around 12%. For the SET to begin to trend upwards, exports would also have to do the same. That would mean that businesses are growing, new businesses being created and the demand for Thai products increasing. In general, those things aren't happening, there is a lack of innovation and quality levels are low. Another factor is that the wealth in the country is on the hands of a few. So whilst the likes of Central Group expands overseas, the vast majority simply don't grow.

 

 

Edited December 10, 2023 by Mike Lister

[RotBenz8888]

17 minutes ago, Celsius said:

1997 property bubble

That certainly was a sharp drop, but once the Set recovered, it has stayed flat. From ~2007 until now, it's gone nowhere.

[RotBenz8888]

20 minutes ago, Mike Lister said:

Equity markets like the SET are a forward view of the economy, selected companies have grown but most have flatlined. Pockets of private wealth exist but wealth across the board has remained flat, if not fallen. The Thai economy is dependent on two things, customs or goods exports which represents about 60% of GDP, and, international tourism which represents around 12%. For the SET to begin to trend upwards, exports would also have to do the same. That would mean that businesses are growing, new businesses being created and the demand for Thai products increasing. In general, those things aren't happening, there is a lack of innovation and quality levels are low. Another factor is that the wealth in the country is on the hands of a few. So whilst the likes of Central Group expands overseas, the vast majority simply don't grow.

 

 

Why is middle class growing property market sky rocketing etc? My perception is that they're economy is booming, or is it all an illusion?

[Mike Lister]

Actually, there wasn't so much a property bubble in 1997 as there was a uncontrolled surge in borrowings in foreign currency.

[msbkk]

While the SET 50 has 50 underlying stocks the weightings are not representative for the economy overall. Energy stocks alone have a weighting of close to 30% of the index. Another 25% are banks and communication stocks. Another reason is that stock prices do not always reflect the economy overall, expecially foreigners have withdrawn lots of capital this year. 

[Mike Lister]

1 minute ago, RotBenz8888 said:

Why is middle class growing property market sky rocketing etc? My perception is that they're economy is booming, or is it all an illusion?

Is the middle class growing, what evidence do you have for that? If it is growing, it's growing on credit rather than on earnings, the GDP figures confirm that.

[Thailand J]

 

SET end of day value not including dividends compared to S&P 500 assume dividends reinvested, 5 yrs, 10 yrs and 20 yrs.

[RotBenz8888]

17 minutes ago, msbkk said:

While the SET 50 has 50 underlying stocks the weightings are not representative for the economy overall. Energy stocks alone have a weighting of close to 30% of the index. Another 25% are banks and communication stocks. Another reason is that stock prices do not always reflect the economy overall, expecially foreigners have withdrawn lots of capital this year. 

Do you know of any other Thai index that is better in terms of reflect the overall economy?

 

As a side note, interesting that HK50 also is at 1997 levels.

Edited December 10, 2023 by RotBenz8888

[RotBenz8888]

16 minutes ago, Mike Lister said:

Is the middle class growing, what evidence do you have for that? If it is growing, it's growing on credit rather than on earnings, the GDP figures confirm that.

Then who do you suggest is buying all the condoes, houses and cars in Thailand? Chinese expats?

[Mike Lister]

2 minutes ago, RotBenz8888 said:

Then who do you suggest is buying all the condoes, houses and cars in Thailand? Chinese expats?

There are some clues in the link below:

 

https://www.thailand-business-news.com/top-news/real-estate

 

Foreign property buyers mostly, Russians, Chinese and others, almost certainly not a majority being sold to middle class Thai's.

 

Cars will be mostly the native population of course who have easy access to credit. NPL's have been increasing.

[StayinThailand2much]

17 minutes ago, RotBenz8888 said:

Then who do you suggest is buying all the condoes, houses and cars in Thailand? Chinese expats?

 

Each household is, on average, with 800,000 baht, or so, in debt. If you borrow 800,000 baht from the banks to buy a house or car, does that increase your wealth?

Edited December 10, 2023 by StayinThailand2much

[Mike Lister]

If you google, "developers warn over unsold homes" you'll see a Bangkok Post article that talks about the oversupply of unsold units and increased NPL's and borrowings. Almost certainly middle class Thai's are not the drivers of the housing market at present.

[RotBenz8888]

Just now, Mike Lister said:

There are some clues in the link below:

 

https://www.thailand-business-news.com/top-news/real-estate

 

Foreign property buyers mostly, Russians, Chinese and others, almost certainly not a majority being sold to middle class Thai's.

 

Cars will be mostly the native population of course who have easy access to credit. NPL's have been increasing.

To a large extent, yes. But if you go beyond the typical expst/tourist areas. You still Se a significant prosperity. Ive traveled to Nakhorn Si thammarat on a regular basis the past 15 years or so, I've seen the moo baan developments explode.  I seriously doubt its Russians or Chinese expats buying there. 

[RotBenz8888]

Just now, Mike Lister said:

If you google, "developers warn over unsold homes" you'll see a Bangkok Post article that talks about the oversupply of unsold units and increased NPL's and borrowings. Almost certainly middle class Thai's are not the drivers of the housing market at present.

Then how come the whole market isn't imploding?

[Mike Lister]

Just now, RotBenz8888 said:

Then how come the whole market isn't imploding?

If you read the article you'll see that developers are being warned that there are too many unsold units. My experience is that new build projects will be suspended until things become more favorable. I don't know what you mean by imploding. The big developers such as Supalai, Sansiri, L&H are sufficiently well capitalised to withstand economic downturns plus they tend to pick their projects carefully. Small developers will have big problems but we may never hear about their demise.

[msbkk]

First of all the SET index in 1997 was at a level where it simply should not have been, there was a huge bubble at that time. As another poster has mentioned there was a property bubble, a lot of highflying stocks without real value went bankrupt and so simply do not exist anymore since that time. 

 

All SET indices are dominated by the same few huge corporations and do not really reflect the overall economy in my view. 

 

[RotBenz8888]

2 minutes ago, msbkk said:

First of all the SET index in 1997 was at a level where it simply should not have been, there was a huge bubble at that time. As another poster has mentioned there was a property bubble, a lot of highflying stocks without real value went bankrupt and so simply do not exist anymore since that time. 

 

All SET indices are dominated by the same few huge corporations and do not really reflect the overall economy in my view. 

 

That crash was deep, but set recovered, yet 2007-now, SET50 has barely moved.

 

Do you know any better Thai stockmarket index?

[RotBenz8888]

Does SET100 better reflect the oveall economy? Hasn't moved since ~2012.

Edited December 10, 2023 by RotBenz8888

[Mike Lister]

17 minutes ago, msbkk said:

First of all the SET index in 1997 was at a level where it simply should not have been, there was a huge bubble at that time. As another poster has mentioned there was a property bubble, a lot of highflying stocks without real value went bankrupt and so simply do not exist anymore since that time. 

 

All SET indices are dominated by the same few huge corporations and do not really reflect the overall economy in my view. 

 

You're right, the SET does not reflect the Thai economy, it would be interesting to see what percentage of GDP SET companies contribute. My guess is a majority of the SET50 support consumer spending rather than exports, AIS, True, BBL, AOT, Global House, HomePro, Kasikorn, Krung Thai Bank, etc etc.

[msbkk]

4 minutes ago, RotBenz8888 said:

Is SET100 a broader index? Hasn't moved since ~2012.

Here is a link to the stock weighting, 10 stocks are nearly 50% of the SET 100  SET100_MonthlyReport_20231130.pdf

[RotBenz8888]

Smalcaps havent move much either. Like emerging markets in general.

[Mike Lister]

34 minutes ago, RotBenz8888 said:

Smalcaps havent move much either. Like emerging markets in general.

That's a USD strength issue, rather than a Thailand issue

[RotBenz8888]

9 minutes ago, Mike Lister said:

That's a USD strength issue, rather than a Thailand issue

Is it? Looks like sideways since 2020.

[Mike Lister]

38 minutes ago, RotBenz8888 said:

Is it? Looks like sideways since 2020.

Not really, the pair has been very volatile, a different level of granularity shows it better. As the US Fed increased rates, so USD strengthened. As it did, capital flowed out of all EM's and Asia and into USD.

 

 

 

 

[khunjake]

Even the wealthy elite Thai’s invest their capital in overseas equities. Why buy a low-growth market when you can invest in the Magnificent-7 Nasdaq 100 stocks and make 45% this year alone. The only worthwhile market in asia is India which continues to steadily outperform. 

[Adumbration]

 Very few domestic investors in the SET.  The index moves almost solely on the ebb and flow of foreign investment.  Thailand Is a basket case and foreign investors are shot of it.  Much better opportunities in the Indian or Viet markets.

 

Thai stock analysists are well aware that the SET is dead in the water and will be for another decade.  I read a article a few years back stating just that, but cannot be bothered trying to find the link.