SET mulls measures after Delta surge

SET mulls measures after Delta surge

The Stock Exchange of Thailand (SET) is considering implementing both short- and long-term measures to stabilise the market after the sudden surge of Delta Electronics' (DELTA) free-float shares disrupted the SET Index on Monday, says a market analyst who requested anonymity.

"The market must be adaptive to changes, including any unprecedented issues that rarely occurred in the past," the source said.

Delta's shares have soared by over 280% since November, up from about 180 to 838 baht, an all-time high, on Monday. This movement shocked analysts as the price was more than double all research houses' fundamental projections.

Koraphat Vorachet, senior vice-president of Capital Nomura Securities, said Delta's share price has soared in accordance with institutional investors' portfolio weight adjustment of their passive funds.

Delta is slated to join the MSCI, FTSE and SET50 indices in January 2021.

The total combined worth of passive funds is around 3.37 billion baht.

"As the price is overshot, the analysts' consensus is to sell," said Mr Koraphat.

He said after the portfolio adjustment, the share price may correct closer to its fundamentals, driving the SET50 Index to fluctuate.

Delta shares are expected to weight about 6.5% on the SET50 Index and overpriced shares would cause volatility on that index for a short period at the beginning of next year, said Mr Koraphat.

He said if Delta shares are excluded from the index calculation, Thai shares will be quite expensive as the SET vs equity premium will be higher. The SET Index next year should potentially correct to around 1,400-1,370 points, said Mr Koraphat.

"The SET Index next year will move in a range of 1,300-1,650 baht, offering traders opportunities to accumulate good stocks for medium and long-term investment," he said.

The key factor to watch for in the Thai bourse next year is how effectively the government handles the outbreak, said Mr Koraphat.

According to research by Asia Plus Securities (ASP), the 24.8% spike of the SET Index from November to Dec 25 was driven by two factors. The first is foreign fund flows induced by foreign investors' buybacks of large-cap shares worth 32 billion baht. The second is the impact of the exponential rise of low free-float shares, including those of Delta Electronics.

Paradorn Tiaranapramot, an analyst at ASP, said 13 stocks outperformed the market and rose over 40% from Nov 1-Dec 25, with more than double daily trade volume, while low free floats contributed less than 25%. These 13 shares raised the SET Index by 76.91 points or 6.4%.

Mr Paradorn said investors should consider the fundamentals and liquidity of each stock before investing.

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