Published on December 26, 2007
Shares of Shin Group companies surged yesterday in response to the election results, which saw the pro-Thaksin People Power Party (PPP) win a majority with 233 seats.
Shin Corp, Advance Info Service (AIS) and Shin Satellite - all founded by ousted prime minister Thaksin Shinawatra - witnessed a sharp price increase on the Stock Exchange of Thailand.
AIS was ranked ninth in terms of transaction value, when shares worth Bt387.5 million changed hands.
Joining the euphoria was SC Asset, a property development firm owned by the Shinawatra family, which was the second in the top-10 gainers, with a 23.76-per-cent gain to close at Bt12.50.
A Trinity Securities analyst attributed the strong buying force to the fact that investors felt that some Shinawatra-associated shares such as SC Asset and AIS had been underperforming for some time.
An analyst of a foreign brokerage house, who asked not to be named, said the surge in Shin Group shares was a result of the psychological effect on stock investors who consider that if the PPP formed the next government, the situation would favour Shin companies.
AIS president Wichian Mektakran declined to comment on the share prices, insisting that Shin policy is to stay away from involvement in politics.
On the first trading day after the election, the SET Index rose 0.96 per cent in opening trade before closing at 843.28, up 3.65 per cent on the day with a trading value of Bt19.31 billion.
But analysts warned that the rise was a result of short-term psychological sentiment, as uncertainty still prevails pending the forming of a coalition government.
The Shin share price closed at Bt25.50, up from Bt24.70. AIS closed at Bt98, up from Bt91.
The stock of Shin Satellite closed at Bt10.20, up from Bt9.35. The price of handset retailer M Link ended at Bt1.35, up from Bt1.10, and that of property development firm Wyncoast Industrial Park closed at Bt1.29, up from Bt1.17.
M Link was co-founded by Thaksin's sisters, Monthatip Kovitcharoenkul and Yaowapa Wongsawat. Wyncoast is mainly owned by the Wongsawat family.
The buoyant mood about Shin Group's shares was also attributed to the announcement by Thaksin that he would return to Thailand.
Some companies under the Shin umbrella are facing legal disputes over the legality of their concessions. Analysts said the market expected that if the PPP leads the coalition government, the ongoing issues with Shin Corp could be resolved in favour of the group.
The Shinawatra family is the founder of Thailand's largest telecom holding firm, Shin, but disposed of about 50 per cent of the shares in Shin to a group led by Singapore's state investment arm Temasek Holdings in January 2006. Currently Temasek controls about 97 per cent of Shin through its affiliates Cedar Holdings and Aspen Holdings.
The Council of State ruled in May that past concession amendments of four major mobile-phone operators did not comply with the 1992 Public-Private Joint Venture Act, given that the revisions were not submitted for Cabinet approval. The concessions are those of AIS, Total Access Communication (DTAC), Digital Phone and True Move.
The panels of both TOT and CAT Telecom, which are under the ICT minister's umbrella, have recently set up a committee to negotiate with the four concessionaires to bring their past concession amendments in line with the Act. The process has shown no progress.
In spite of the SET Index rise, a Capital Nomura Securities analyst said the sentiment would be short term, as the bourse will be pressured by political uncertainty concerning which parties will be forming the coalition government.
"Nonetheless, regardless of which party will be forming the government, the fiscal policy won't be much different, especially the mass-transit projects which are popular among voters, because a coalition government normally is unlikely to stay a full four-year term," the analyst said.
Kitti Hamnilrat, an analyst at Ayudhya Securities, said the SET had risen in response to the smooth election. The market nonetheless is keeping an eye on the issue of whether the Election Commission will issue red and yellow cards to some winners following electoral fraud.
The analyst also attributed the rise to investors' rush to buy long-term equity funds for tax deduction before the New Year.
"Things should be clearer after February 7," he said. "Between now and then, investors should be cautious. The risk factor is the stability of the new government."
A Kiatnakin Securities analyst, who asked not be named, said the SET had risen because of the fair and peaceful election. But he warned that there were uncertainties surrounding the political situation.
KGI said in its research that if the PPP proved successful in setting up a coalition government, investors should monitor two issues that could lead to disputes between pro- and anti-Thaksin groups. The first is the proposal to grant amnesty to 111 members of the now defunct Thai Rak Thai Party, who were banned from Thai politics for five years.
The second issue concerns the legal cases against Thaksin and the PPP's action towards bodies such as the Assets Examination Committee.
Nonetheless, KGI expects a positive market reaction because, "regardless of whether the PPP or the Democrats set up the new government, we believe the current situation poses minimal risk for political unrest and/or objection against election results".