Revisions to liquidity criteria on Thailand’s stock exchange likely from H1 2023: CGS-CIMB
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DUE to concerns that large-cap stocks have become less active than their mid-cap counterparts, the Stock Exchange of Thailand (SET) is considering lowering the current liquidity threshold for inclusion on the benchmark SET50 index to about 2 per cent from 5 per cent currently, among other measures.
CGS-CIMB estimates that such changes to the liquidity criteria are likely to become effective for the next review period, namely in the first half of 2023.
The research house has reiterated its end-2022 SET index target of 1,730. This is based on 16.3 times price-to-earnings estimates for FY2023, 1 standard deviation below the index’s 5-year mean.
“We believe the recent market weakness offers a good buying opportunity as we expect the economic recovery to gain more momentum in Q4 2022 and 2023,” said analyst Kasem Prunratanamala in a report on Tuesday (Sep 6).
Assuming a lower liquidity threshold of 2 per cent, Prunratanamala has identified Siam Makro as “the most likely” candidate for inclusion on the SET50. However, he cautions that the cash-and-carry wholesaler will have to increase its free float to 20 per cent from its current 13.5 per cent to be eligible – a feat that will “not be easy”, in the analyst’s view.
Should the threshold be lowered further to just 1 per cent, he believes Thailife Insurance and energy producer Ratch Group would have higher chances of being included on the index than Siam Makro.
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“If more big caps are added in the SET50 index, the stocks that are likely to be taken out include Bangkok Life Assurance, KCE Electronics, Srisawad Corporation, IRPC and Ngern Tidlor,” added Prunratanamala.
He opines that a tamer inflation outlook, more foreign inflows and buying by local institutions could catalyse the market going forward.
This could be particularly so for stocks such as Bangkok Bank, where foreign inflows are expected to return, as well as Bumrungrad Hospital, which is believed to be the prime beneficiary of the return of foreign patients.
CGS-CIMB also highlighted Central Retail Corporation as the only retailer under their coverage that delivered stronger-than-anticipated results in Q2 FY2022. The brokerage expects the company to continue posting an upbeat financial performance in the near term.
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