Economics: A “Morally Correct” Thai Stock Market & how Retail Investors Pay the Price

I want to gamble in the Siamese stock market, but through professional gamblers

  • by Pooky, this blog economics journalist

The Thai stock market, SET, is a place for “Moral High-Ground” investors-as far as the SET managers is concerned.

  • The SET managers, have tried very hard to educate retail investors, to invest as investors, and not gamble. The SET in fact, had been on a long-run campaign now-sponsoring all sorts of books and seminars and media-precisely to up-grade retail investors investment behaviors.
  • In fact, retail investors “short-term” gambling like strategies, is called a “Prohibitive Factor” against SET’s development.

In fact, while that up-grade of retail investors is going on, the SET is also trying to change the structure of SET investments-by getting more institutional and foreign investors involved in the SET investment.

  • In a recent study of investors in the Thai stock market, SET, the research found that retail investors in Thailand usually do very poorly and gets hammered by the SET-meaning they ultimately are loosing money from their SET investments.

The reason, the research found, is because retail investors, mostly, play the stock market with a very short-term view. Many, retail investors here in Thailand, by and sell many rounds in a day-in and out in rapid successions.

  • So retail investors are loosing money-and all the education and media blitz by the SET officials to help retail investors, have very much failed.

What the research found, is that institutional investors, like mutual funds, make money for their unit holders. Foreign investors are a mixed-bag-sometimes making money and other loosing money-it depends.

  • Underlying it all at the SET, is the Boston Consultant Recommendations-called into help developed the stock market-with the objective of increasing the numbers of Thai retail investors in the stock market so the market can be larger and more attractive overall.

With a more attractive market, with more participants, the SET official argues that the SET can serve beter as a place for raising capital. So that Thai companies, do not have to just run to the bank for money, as with SET being attractive and viable and also functioning well, it is a way to redistribute wealth and help solve Thailand’s rich and poor gap.

  • That campaign had led SET to pinpoint, the young educated crowd as the emerging retail base for SET investment.

And apparently, the strategy had worked, the number of retail investors had increased-in fact, the number of retail accounts for SET investment had increased by about 15% a year for the past 5 years now.

However, the fundamental fact, is that retail investors, as a group, continues to lose money.

  • The debate at the SET right now, is if the strategy had back-fired, and particularly have all the educational efforts failed.

Some SET directors, are saying perhaps, the solution is what occurs in more advance markets.

  • “I am starting to think perhaps if there are mutual funds, like very very short-term speculative funds, and also hedge funds in Thailand or even funds based on futures market, they might be a more realistic solution to solve the SET problems,” said a SET regulator, to one of the local media, in very small letters, in a very small article that most would surely missed.

Obviously, the rationale of that SET regulator, is so that retail investors, short-term investment strategy, can be put into professional hands.

  • Yet the fundamental fact is that, most of the SET managers, still see themselves, as the “Protector of Moral High-Ground Investments.” That means, the image of the SET as being morally correct, is more important than living with retail investors that just simply “Do not know how to invest.”

Some observer, have said, in fact, that the SET manager drive to get more retail investors-is just to keep them coming to feed institutional investors and foreign investors appetite.

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