Why is SET50 a good choice for investors? What should you know about SET50 stocks?

Basic Understanding of SET50

Before investing, many people may wonder why SET50 is currently a hot topic in the investment community. Because SET50 is a price index that reflects the trend of the 50 top-performing stocks in the Thai stock market. It is not just a random number but a selection of stocks based on strict standards.

The key point to understand is that SET50 is related to the (SET Index), the main index. The SET Index measures the movement of all listed stocks in the stock exchange, including REIT units, while SET50 acts as a concise and efficient representative of the SET Index because it includes only large-cap stocks that have been carefully selected by the committee.

What are the SET50 Stocks? Selection Criteria You Need to Know

Stocks included in the SET50 must meet several requirements:

Basic Conditions:

• Common stocks traded on the stock exchange and listed for at least 6 months
• Not in the process of delisting
• Not under temporary suspension (SP) or at risk of suspension
• No debt repayment issues affecting the company’s financial position
• The company is not bankrupt, in rehabilitation, or in liquidation

Financial and Market Criteria:

• Market Capitalization (Market Capitalization) ranked within the top 200
• Minor shareholders hold at least 20% of paid-up capital
• Consistent trading volume of at least 50% of the average

After passing the screening, the top 50 stocks are accepted into SET50, with a review of the list twice a year (June and December). There are also backup stocks ranked 51-55 in case of changes.

Components of SET50 You Should Remember

The SET50 list includes leading companies across various sectors such as:

• Telecommunications: ADVANC (Advanced Info Service), DTAC (Total Access Communication)
• Transportation: AOT (Airports of Thailand), BEM (Bangkok Expressway and Metro), BTS (BTS Group Holdings)
• Financial: BBL (Bangkok Bank)
• Health: BDMS (Bangkok Dusit Medical Services), BH (Bangkok Hospital), BJC (Burlington Group)
• Energy: BGRIM (B. Grimm Power), BPP (Banpu Power), EA (Energy Absolute), EGCO (Electricity Generating)
• Consumer Goods: CPALL (CP All), CPF (Charoen Pokphand Foods), CBG (Carabao Group)
• Real Estate: CPN (Central Pattana), CRC (Central Retail Corporation), AWC (Asset World Corporation), GLOBAL (Siam Global House)

These large businesses often have stable income, strong financial positions, and high liquidity.

How to Calculate and Track SET50

The SET50 index is not calculated simply but weighted by market value using the formula:

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

where:

• Current Market Value (CMV) = total value of all SET50 stocks on the calculation date
• Base Market Value (BMV) = total value on the base date ( August 16, 1995)
• Base Value = 1,000 points (Reference value)

This method gives larger companies with higher Market Capitalization more weight in increasing or decreasing the index, accurately reflecting the stock market movements.

Key Factors Driving Changes in SET50

Economic Conditions

When the economy expands and confidence is high, money flows into the stock market, pushing SET50 upward. Conversely, during economic slowdown and shaken confidence, funds tend to exit, causing SET50 to decline. You can monitor economic indicators such as employment rate, interest rates, inflation, GDP growth, and consumer confidence indices.

Political Stability

Countries with political stability attract more investors. Unexpected events like coups, protests, or political conflicts increase risk, discouraging investment and potentially impacting SET50.

Gold and Commodity Prices

Gold prices often serve as a market warning signal. When gold prices soar, it indicates investors lack confidence in risky assets like stocks and seek safe havens. Such conditions may lead to reducing stock holdings (and a decline in SET50).

Capital Inflows and Outflows

The Thai stock market is heavily influenced by foreign investors (called “Farangs”). If foreign investors see high growth potential and profit opportunities in Thailand, they will bring in substantial funds, boosting SET50. Conversely, if risks are perceived, they may withdraw funds (to other countries).

Other investment groups include institutional investors, securities funds, (POP), and retail investors (“Mao”). Movements among these groups also impact index fluctuations.

How to Invest in SET50 for Profit

After understanding what are the SET50 stocks and how the mechanism works, the smartest way to invest is not necessarily buying all 50 stocks directly, as it can be complicated and time-consuming to manage.

Suitable options:

1. Derivatives linked to SET50

• SET50 Index Futures are contracts for speculation or hedging that can profit from both rising and falling markets
• SET50 Index Options offer profit opportunities with lower premiums

2. Mutual funds investing in SET50 For beginners, this may be a simpler and safer choice, as management is handled by professionals.

Steps to open a Futures account:

If choosing to trade SET50 Index Futures, you must open a TFEX (Thai Futures Exchange) account first by contacting securities companies. Typical required documents:

• Original ID card with 2 copies
• Original house registration with 2 copies
• Bank statement from the past 6 months or other financial documents with 2 copies
• Copy of certification of training on derivatives (if submitting)
• Stamp duty fee of 30 Baht

If authorizing someone else, prepare ID card and house registration of the authorized person as well.

Summary of Investing in SET50

Investing in SET50 is a reasonable choice, especially for:

• New investors unfamiliar with selecting individual stocks
• Those seeking to reduce risk by investing in a curated group of stocks
• Investors looking for suitable tools aligned with market trends

SET50 stocks are the best representatives of the Thai stock exchange, carefully filtered. Although they may not offer high returns like speculative stocks, SET50 provides a balanced investment opportunity between safety and growth potential.