Mr. Vicharat Vichit-Vadakan, SET President, announced that the bourse will adjust the base index value of its SET Index, and no securities suspended by the SET for more than one year will be included in the index calculation because the stock price before such a trading suspension doesn't reflect its current fundamental factors. Consequently, using the earlier stock price in the index calculation may mislead investors regarding the actual movement value of this stock.
When a stock is allowed to trade after a long suspension, its market price has a tendency to change tremendously from its earlier price. This stock price change is determined by comparing the earlier suspension price and its first day market price. As the index calculation method reflects the price change of all listed stocks, this enormous price change in the suspended stock will impact heavily on index movement. Specifically, price changes in stocks with high market capitalization will radically affect the SET index.
"This new SET Index base value adjustment will ensure that the SET Index reflects the actual movement value of stock prices. Listed companies that have completed capital restructuring and have resumed trading will be considered as newly-listed stocks. Thus, their market value on the first trading day will not be included in the index calculation. The closing price on the first trading day will, however, be used as the base price to adjust the base index value for further index calculation. This will insure that the price will truly reflect the real movement value of the stock. As of the end of May 2001, there were about 40 listed companies that have been under trading suspension for more than one year." Mr. Vicharat said.
When listed company stocks that have been suspended from trading longer than one year are allowed to trade again, these listed companies must distribute more than 10 percent of their paid-up capital to minor shareholders. This will result in greater market efficiency as the public will have increased access to shares, and the market can reduce fluctuations caused by the imbalance between supply and demand. On the first trading day after a suspension, the ceiling and floor limits will be temporarily lifted in order to allow market mechanisms to determine the suitable market price freely.
