Why not passive management for the Thai market

[AyG]

Generally I prefer active management for most equity markets - particularly emerging markets. However, I do hold one emerging market ETF. I was going through its holdings and noted its sole Thai stock, BEC (owner of Thai Ticket Major and TV Channel 3) was marked as "illiquid". That made me curious, so I looked at the major shareholders. Members of one family hold just over 42% of the stock. 24.7% of the stock is held by children in the family. I wonder how independent their voting is? There's also a 12.2% holding by Chase Nominees. I wonder who's behind that holding?

So, the family gets all the benefits of an SET listing, including tax privileges, without little of the responsibilities associated with public listing.

Can one have any confidence that the company is being run for the benefit of all shareholders, not just the family?

The stock is a constituent of the SET50 so must be bought by funds and ETFs tracking that index, so pushing the price up abnormally (particularly abnormally because of the small free float).

Whilst this example is particularly egregious, it does reflect that the SET is basically a snake pit. I personally wouldn't choose to invest in it passively. A good fund manager is needed to weed out the asps.

[elgordo38]

All these companies are manipulating things look at what Nike did. They did a large share buyback with borrowed money no doubt you know your money and mine sitting in the banks getting zero percent interest. They no doubt paid a very low interest rate to the bank. Greedy stock market watchers took notice and thinking there was more upside to the stock because the Nike was buying it jumped in driving the stock price higher thus raising the profits on the stock Nike bought. By doing this buyback they reduce the stock float which also helps drive the price up its a win win situation for them. This is a short term measure as it does little to add true value to the stock only manipulates it. Years ago companies took their profits and built new factories and hired people sadly those days are over. I wonder what will happen if and when interest rates rise and the market drops sharply.? I guess they write off the loss against future earnings.There is always an out for these people.

[WorkingTourist]

All these companies are manipulating things look at what Nike did. They did a large share buyback with borrowed money no doubt you know your money and mine sitting in the banks getting zero percent interest. They no doubt paid a very low interest rate to the bank. Greedy stock market watchers took notice and thinking there was more upside to the stock because the Nike was buying it jumped in driving the stock price higher thus raising the profits on the stock Nike bought. By doing this buyback they reduce the stock float which also helps drive the price up its a win win situation for them. This is a short term measure as it does little to add true value to the stock only manipulates it. Years ago companies took their profits and built new factories and hired people sadly those days are over. I wonder what will happen if and when interest rates rise and the market drops sharply.? I guess they write off the loss against future earnings.There is always an out for these people.

As for driving the stock up, it was at 133 the 10th of October. The announcement came this Thursday and the stock closed Friday at 132.62.

The buyback itself has not been executed. It will happen over the next four years and is pending final authorization.

If you call a stock buyback announcement for “manipulation” then you sure don’t think high of investors, I mean, just type NKE into google and you instantly get key numbers such as the P/E ratio and dividend yield, and that goes a long way to make a quick judgement about how much future growth is already priced into the stock.

[Robert24]

All these companies are manipulating things look at what Nike did. They did a large share buyback with borrowed money no doubt you know your money and mine sitting in the banks getting zero percent interest. They no doubt paid a very low interest rate to the bank. Greedy stock market watchers took notice and thinking there was more upside to the stock because the Nike was buying it jumped in driving the stock price higher thus raising the profits on the stock Nike bought. By doing this buyback they reduce the stock float which also helps drive the price up its a win win situation for them. This is a short term measure as it does little to add true value to the stock only manipulates it. Years ago companies took their profits and built new factories and hired people sadly those days are over. I wonder what will happen if and when interest rates rise and the market drops sharply.? I guess they write off the loss against future earnings.There is always an out for these people.

You cannot write something off against future earnings. Higher borrowing costs for debt will reduce profit instantaneously, not delayed, if that were to happen.

[AlQaholic]

Well if it is a Thai company and it is owned by many different shareholders (not family members), rest assured that the Thai management makes sure that all sub-suppliers and service providers to the business are all family companies or friends companies and all provide services and supplies at inflated prices with no procurement rules or standards whatsoever, thus the SET listed company itself makes very little profit or no profit at all or even a loss....Another reason NOT to invest in Thailand.

Edited November 23, 2015 by AlQaholic

[bazza40]

Companies with family interests are never going to act for the benefit of all shareholders. It's all about raising capital from sheep-like investors.

The most egregious example of this on the Australian stock exchange is News Ltd, controlled by the Murdoch family through a complicated share register where the family actually owns about 25% of the shares, but has the majority vote. Financial jiggery-pokery at its best.

Rupert Murdoch has always treated shareholders with contempt. Dividend yields are derisory, about 1% on average. Have never owned a News Ltd. share, never will.

Edited November 23, 2015 by bazza40

[GOLDBUGGY]

All these companies are manipulating things look at what Nike did. They did a large share buyback with borrowed money no doubt you know your money and mine sitting in the banks getting zero percent interest. They no doubt paid a very low interest rate to the bank. Greedy stock market watchers took notice and thinking there was more upside to the stock because the Nike was buying it jumped in driving the stock price higher thus raising the profits on the stock Nike bought. By doing this buyback they reduce the stock float which also helps drive the price up its a win win situation for them. This is a short term measure as it does little to add true value to the stock only manipulates it. Years ago companies took their profits and built new factories and hired people sadly those days are over. I wonder what will happen if and when interest rates rise and the market drops sharply.? I guess they write off the loss against future earnings.There is always an out for these people.

True that some companies can use share buybacks as a form of stock manipulation and many do, but that is not always the case. Sometimes, especially when the share price is abnormally low, the best investment a company can make is buying back it's own shares. Even on borrowed money.

True that the profit margin isn't any greater this way, and you still have the same sized pie. But you also have less people to share this pie with so technically they all now should get a bigger piece. But seldom do you see a share price increase after a buyback, even when they use there own cash, which I find odd.