Setting up an account with a Thai Broker to trade Small Cap Stocks
Last fall several of the participants on this board provided me with some advice, prior to a trip I made to southeast Asia to set up brokerage accounts and research stocks. I thought I would report back on the trip, as it relates to Thailand.
The Thai small cap stocks are much more compelling buys, to me, than the large caps. I found small companies with clean balance sheets, low debt, and good growth rates, ROE, and margins selling at very attractive valuations relative to P/E, Book Value, etc. On the other hand, I didn't run across any large cap stocks that appeared both safe and dirt cheap. I think the large caps aren't as intriguing, in part, because the large Asian funds are the big players in this arena. On the other hand, the locals who trade the small caps right now would rather have their money in the bank bringing 20% interest, rather than in a small cap stock with a P/E ratio of 5 and an annual growth rate of 15%.
I felt like a kid in a candy store.
The only Thai broker that I could find that would accept my business and that had some experience dealing with foreign retail investors was TISCO, an affiliate of Bankers Trust. Their commission rate is only 0.5% of the value of a transaction, with a 50 baht minimum.
The great thing about the Stock Exchange of Thailand (SET) is that they use a computer-matching system that automatically matches your buy order with the sell order of another retail investor. This is a lot fairer than NASDAQ, and a little fairer than the specialist system at the NYSE.
I know most of the participants on this board are investing in large cap situations. However, IF YOU'RE PAYING A 5% COMMISSION TO A U.S. BROKER, OR IF YOU'RE GETTING SOCKED WITH A BIG SPREAD BETWEEN BID AND ASK, OR IF YOU'RE PAYING A PREMIUM TO BUY AN ADR WHEN YOU COULD BUY THE STOCK ON THE SET, YOU REALLY SHOULD LOOK INTO SETTING UP AN ACCOUNT WITH TISCO.
I've traded one of these stocks with a U.S. broker, and between the commission and the spread, my transaction costs were ridiculous. It's ridiculous to pay a spread to deal with a U.S. broker, when you don't have to if you deal with a Thai broker. Also, it's ridiculous to pay a big premium for an ADR or for a closed-end Thai fund when you can buy directly on the SET. (By the way, I'm guilty of doing just about everything here that I call ridiculous, so please don't take offense if you've made some of the same mistakes I have.)
The best resource for setting up a Thai brokerage account or for investing in Thai small cap stocks is Paul Renaud. He has a web site called www.thaistocks.com and his E-mail address is Thaistocks@aol.com. He gives step-by-step instructions on his web site for setting up an account. His small cap recommendations have skyrocketed in the last few months. Earlier in 1997 when the Thai market was falling into oblivion, his picks were keeping their value.
If this is a plug, so be it. Once I subscribed to Paul's web page, he helped me out a lot, both through phone calls and E-mail. I found both the information on his web site and his answers to my questions to be invaluable. He's spent 10 years living in Thailand and investing in the stock market there, and there's no way I could have come up to speed on the country quickly without his help. |
