Stock Dimension Analysis: SET50/100 and SET50FF/SET100FF Indices
The Securities Research Department of CGS-CIMB (Thailand) has released an analysis predicting the upcoming changes to the Stock Exchange of Thailand (SET) indices. The department expects that the names of the stocks used in the calculation of the SET50/100 and SET50FF/SET100FF indices will be announced by SET on December 18-20, 2023.
Expected Changes in Stocks
According to the analysis, the upcoming calculation for the SET50 index is predicted to include KCE, ITC, and JMT. Conversely, DELTA, INTUCH, and TLI are anticipated to be removed from the calculation. DELTA’s inclusion on the list of stocks subject to trading supervision measures, along with its low trading turnover ratio, makes its removal likely. Similarly, TLI’s significant stock price decline and INTUCH’s low trading turnover rate suggest they will also be dropped from the SET50 index.
Introduction of SET50FF/SET100FF Index
In addition to the anticipated changes to the SET50 and SET100 indices, SET is planning to release a new index, SET50FF/SET100FF, effective January 1, 2024. This new index will utilize the same principles as SET50/SET100 in selecting the top 50 and 100 listed companies but will calculate the weight of the stocks based on market capitalization and free float percentage. The introduction of this new index is believed to address concerns over volatile prices of stocks with low free float, such as DELTA.
Potential Market Impact
It is estimated that around 70 billion baht are under management of passive funds that use the SET50 index as a benchmark. With the potential removal of DELTA from the SET50 index, there could be a capital outflow of 6.9 billion baht if passive funds switch to SET50FF as the reference index in early 2024. On the other hand, it is expected that BBL, with a high free float percentage, could benefit from being included in the SET50FF index, resulting in an inflow of approximately 2.3 billion baht.
Future Projections
The research department has set a target of 1,700 points for the SET index by the end of 2024, corresponding to a P/E of 16.5 times in 2025. It is believed that the different weighting methods of the SET50 and SET50FF indices will have a positive impact on most banking stocks, while technology stocks, particularly DELTA, may experience negative effects. Despite this, it is anticipated that the SET50FF index will be less volatile than the SET50 index.
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Stock Dimension – The Securities Research Department of CGS-CIMB (Thailand) said in an analysis that the Stock Exchange of Thailand (SET) is expected to publish the names of the stocks used in the calculation of the SET50/100 and SET50FF/SET100FF indices on December 18-20, 2023, the research department expects The stocks taken into the SET50 calculation this round are KCE, ITC and JMT, and the stocks that will be removed from the calculation are DELTA, INTUCH and TLI.
DELTA is on the list of stocks subject to trading supervision measures in April, June and July 2023, and it is likely that the trading turnover ratio will not be reached in November. 2% therefore believe that DELTA should be removed from SET50. As for TLI, the stock price has fallen sharply and INTUCH has a low trading turnover rate. Therefore, it is likely that TLI and INTUCH will be dropped from SET50 as well.
SET50/SET100 index to be published in this round Effective in the first half of 2024. In addition, the Stock Exchange intends to publish a new index, namely SET50FF/SET100FF on 1 January 2024 using the same principles as SET50 /SET100 in selecting the top 50 and 100 listed companies.
But calculating the weight of the stocks SET50FF/SET100FF It uses market capitalization and weights it according to the percentage of holding small stocks (Free float) It is believed to be one of the reasons why SET created the new index. Due to concern about the volatile prices of stocks with low free float, especially DELTA stock, which has only 22% free float but the stock price fluctuates a lot. and high valuation on P/E of 55 times in 2023 and 45 times in 2024 (based on CGS estimates)
Data from Finnomena shows that around 70 billion baht are under management of passive funds that use the SET50 index as a benchmark. So the research department estimates that DELTA could have a capital outflow of 6.9 billion baht if all passive funds switch to a new index such as SET50FF as the reference index in early 2024.
At the same time, it is believed that BBL, which has a free float of 98.6%, is likely to benefit from being included in the SET50FF index as the weight of the stocks in the SET50FF index is expected to increase from 2.5% to 5.4%, which meaning there could be an inflow of around 2.3 billion baht
The research department still targets the SET index at the end of 2024 at 1,700 points, which corresponds to a P/E of 16.5 times in 2025, believing that the different weights of the SET50 index (market cap) and r SET50FF index (free float) has a positive impact on most banking stocks Although it will have the most negative impact on technology stocks, especially DELTA, it is also believed that the SET50FF index should be less volatile than an index SET50.
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