SET50 for Thai investors: From fundamentals to wealth accumulation

SET50 is the main indicator of the Thai stock market but actually

Before talking about SET50, we need to understand the term SET. The SET Index is the first indicator of the Thai stock market, representing all listed stocks on the exchange, reflecting all market changes.

SET50 itself is the selection of the 50 best stocks from the Thai stock market. These stocks must meet fairly strict selection criteria. When the prices of these large stocks change, the SET50 will also change. Often, the SET50 and the SET Index move in the same direction, making the SET50 considered an important proxy for the overall market condition.

The SET50 is used as a tool to measure the strength of large-cap stocks. Securities companies then create derivative products such as SET50 Index Futures and SET50 Index Options to allow investors seeking high risk to pursue short-term profits.

Why does SET50 seem safer?

Because stocks in the SET50 are large companies with solid fundamentals, subject to strict regulations. Many people view investing in SET50 stocks as having lower risk than buying smaller stocks. Many investors start their investments with SET50 stocks due to this relative safety.

However, you still need to conduct your own analysis and evaluate future trends of these stocks. Do not rely solely on this safety aspect.

SET50 selection criteria you need to know

Stocks entering the SET50 must meet the following standards:

Fundamental Qualifications

• Common stocks traded on the stock exchange and listed for at least 6 months
• Not undergoing delisting process or suspended from trading
• No debt issues affecting financial status; not bankrupt or undergoing rehabilitation

Financial Indicators

• Market Capitalization (Market Capitalization) in the top 200
• At least 20% of paid-up capital held by retail investors
• Consistent trading volume not less than 50% of the average

The top 50 stocks meeting these criteria are included in the SET50, while ranks 51-55 are reserve lists. The list is reviewed twice a year: in June and December.

Which major stocks are in the SET50?

To give a clearer picture, here are 20 example companies in the SET50:

Financial sector: BBL (Bangkok Bank), BDMS (Bangkok Dusit Medical Services)

Telecommunications: ADVANC (Advanced Info Service), DTAC (Telenor Group)

Transportation: AOT (Airports of Thailand), BEM (Expressway and Mass Transit Authority)

Real Estate: AWC (Asset World Corporation), CPN (Central Pattana)

Energy: BGRIM (B.Grimm Power), EA (EGCO Group), EGCO (Electricity Generation)

Food Industry: CPF (Charoen Pokphand Foods), CBG (Carabao Group)

Retail: CPALL (CP All), CRC (Central Retail)

Media and Others: BTS (BTS Group), BH (Bumrungrad Hospital), BJC (Berkshire Hathaway), BPP (Banpu Power), GLOBAL (Siam Global House)

Calculating the SET50 is easier than you think

The SET50 uses a Market-Cap Weighted method. The formula is:

SET50 Index = (Current Market Value ÷ Base Market Value) × Base Value

where:

• Current Market Value (CMV): total market value of the 50 stocks on the calculation day
• Base Market Value (BMV): total market value on the base date (August 16, 1995)
• Base Value: index base point = 1,000 points

This method helps the index accurately reflect market reality, as companies with higher market caps have more influence on the index movement.

Four factors driving SET50

1. Economic cycle

When the economy expands, confidence rises, and money flows into the stock market. SET50 tends to strengthen. Conversely, during economic downturns, money exits the market. Key economic indicators include employment rate, interest rates, inflation rate, GDP growth, and consumer confidence index.

2. Political stability

Countries with political stability attract more investor confidence. If there are coups, protests against the government, or political conflicts, investor confidence drops, and capital tends to flee.

3. Commodity behavior

When gold prices surge, it indicates investors are seeking risk-off assets (safe assets) instead of investing in stocks. This can be a leading signal of a potential decline in SET50.

4. Foreign capital flows

The Thai stock market is heavily influenced by foreign investors (foreign investors). When they see growth potential and profits in Thailand, they send capital in, strengthening SET50. If risks increase, they withdraw their investments.

How to accumulate capital in SET50

After understanding SET50, some may wonder how to invest. The first option is to buy all 50 stocks, but that’s complicated, time-consuming, and requires substantial capital.

A more convenient way: SET50 derivatives

Many choose to buy SET50 Index Futures to follow market movements. To trade futures, you need to open a futures trading account (TFEX) at a securities company.

Required documents (example):

• Original ID card + 2 copies
• Original house registration + 2 copies
• Bank statement from the past 6 months + 2 copies
• Derivatives training certificate (if any)
• Stamp duty 30 Baht

Another option is investing in mutual funds with a SET50 portfolio. This is suitable for those who want a fund manager to handle and rebalance the portfolio.

Summary

SET50 is an important indicator of the Thai stock market, representing 50 carefully selected companies. For newcomers to the Thai stock market, starting with SET50 stocks or funds investing in SET50 is a reasonable choice because these stocks are safer than randomly picking stocks. However, studying and managing personal risk remains a key responsibility for investors.