SET scraps calculation method revision
The Stock Exchange of Thailand (SET) has decided not to revise its calculation method regarding free-float adjusted market capitalisation for the SET50, SET100 and SETHD indices after a survey revealed most market participants disagreed with the change.
However, the SET is studying other ways to implement a new calculation method for investors who prefer the change, said Pakorn Peetathawatchai, president of the SET.
The SET conducted the online survey to gauge public opinion on the adoption of free-float adjusted market capitalisation in the calculation method for the indices, aiming to reduce market volatility from price speculation on low free-float stocks.
Various market participants chimed in, including asset management firms, securities firms, legal advisory companies and investors.
The SET previously planned to implement the new calculation method for the SET50, SET100 and SETHD indices from July 2021, and gradually introduce the method to other indices during 2022-2023.
However, most respondents viewed the current calculation criteria as appropriate, with modification likely to affect the value of shares and inconvenience investors.
Respondents said the free-float adjusted calculation method should only be used as a basis for selecting and maintaining stocks in the indices, but not for determining the weight of stocks in the indices. The adjusted weight does not always reflect the real amount of free-float shares, especially those held by foreign nominees.
If the new calculation method were to be implemented, it would add weight to investment in high-powered free-float stocks that are not largely controlled by any major shareholders, which could mean lower management efficiency because the initial owners of these companies have already sold their shares, said the SET.
Most major SET-listed companies are still family-owned and the new index calculation method would not solve the problem of low free-float stocks, according to the survey.
"If the SET wants to use a new index calculation, it should set up new indices that are appropriate for the new method," according to the survey.