SET keeping an eye on 61 firms

The Stock Exchange of Thailand has sent a letter to all securities houses directing them to monitor the apparent speculation in 61 listed companies with price-to-earnings ratios of over 40 times.

"If the stock prices of the 61 firms with P/E ratios of over 40 do not cool down, the SET may use another measure to cool down their share price," SET president Charamporn Jotikasthira said yesterday.

The financial results of the 61 listed firms did not merit the increase in their stock price, he said.

The SET is also cooperating with securities firms to revise the understanding about cash accounts and cash balances when investors buy a stock that shows a P/E of over 40 times.

"Brokers have to suggest how to invest in a risky stock rather than only suggest to invest," he said.

The SET has other measures to investigate the stocks that show prices above their fundamentals such as using the Trading Alert List and forcing investors to use cash when buying risky stocks.

According to the SET source, before the exchange issued the warning to the securities firms, it monitored the market and saw some speculation in listed firms that showed a stock price higher than their financial results would support.

Thawatchai Asawapornchai, chief analyst at Globlex Securities Co, said that during a bull market, it's normal to find Bt20 billion-Bt30 billion in speculation out of total trade of about Bt50 billion a day. It depends on the investors to make a decision to invest.

However, the securities firms have to check and might change the guarantee from 15 per cent to 20 per cent of trade value. This will be a part of managing their business risk.

The SET Index continued to climb by 4.81 points to close at 1,420.95 yesterday on turnover of Bt59.23 billion.