Company insiders are often the canaries in a stock market's coalmine. In Thailand, alarm bells should be ringing, because they've stopped chirping.
Over the past six months, Thai consumer-focused companies of more than $100 million in market value and with at least 5 percent insider shareholding have seen a 34 percent average decline in the stake held by company directors and other employees. And this is likely to be an underestimate because of delayed disclosures.
Bosses who have pruned their stakes include:
- Tassapon Bijleveld, CEO of Asia Aviation Pcl, who has sold 1.9 billion of his family's shares this year for about $224 million.
- Phiched Maneerattanporn, a former executive director of ad-services group Master Ad Pcl, who's offloaded 70 percent of his holding this year.
- Surachai Chetchotisak, chairman of RS Pcl, another ad agency. He forecast a bright outlook for the business in a Bangkok Post interview last year, but got rid of a hefty chunk of his stock last month.
- Suwin Kraibhubes, CEO of skincare retailer Beauty Community Pcl, who has a 46 percent smaller stake now than in February last year.
- Sura Kanittavikul, vice chairman of electronics and smartphone seller Com7 Pcl. He sold 40 million shares, or 10 percent of his stake, in September.
- Thanit Amorntirasan, deputy managing director of Siam Wellness Group Pcl, who disposed of 1 out of every 15 shares this year.
There's also the Peeradechapan family, founders of seaweed-snack maker Taokaenoi Food & Marketing Pcl. They too have done a lot of selling this year.
Why the hurry to offload? One answer could be price. A share index of those seven companies that have seen heavy insider selling has doubled over the past 12 months. If the CEOs and chairmen believe their businesses are overvalued and that Thailand's consumer is shopped out, then a flood of losses could lie ahead:
The 15 percent rally in Thai shares this year began running out of steam in late August, when the percentage of stocks with prices above their 200-day moving average started to stall. While the panic that followed the death of King Bhumibol Adulyadej last month was short-lived, the mood soured again after Donald Trump's election victory. More stocks hit 52-week lows on Monday than touched yearly highs.
Thai consumer-related shares face "strong secular threats to profitability," Stewart Paterson, chief investment officer at Taurus Advisors LLP, said in a note published by Smartkarma. A weakening yuan would lower Chinese labor costs in dollar terms, and that could put a lid on lackluster wage growth in Thailand, frustrating shoppers already weighed down by debt.
A one-time $360 million cash handout to low-income earners should provide some support to consumption. But a full-blown recovery in sentiment might have to await the resumption of democracy, which may not take place before 2018.
Retailers have big plans. CP All Pcl wants to add at least 700 7-Eleven stores next year. That expansion might be mistimed. It's not business-as-usual with the Thai consumer. If company bosses sense that, and are taking action to protect their wealth, maybe it's time companies were a little less gung-ho as well.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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