Fund markets in chaos after halt

Business News - Saturday December 15, 2007

PTT RULING / MUTUAL FUND PRICING AND FUTURE OF ENERGY GIANT'S ASSETS

Fund markets in chaos after halt

Suspension eliminates 15% of SET value

KRISSANA PARNSOONTHORN

Fund managers and investors were thrown into confusion yesterday as the share suspension of market giant PTT Plc threw off unit price calculations for the asset management industry.

Most asset managers said trading of mutual funds continued yesterday, but that pricing and settlement would be delayed until PTT shares resume trade, which would be Tuesday at the earliest.

PTT, which accounts for 15% of the total market capitalisation of the Stock Exchange of Thailand, is a key asset held by fund managers of nearly all equity, pension and provident funds.

''The situation is extremely confusing at the moment,'' acknowledged Maris Tarab, the president of the Association of Investment Management Companies.

Mr Maris said the trading suspension of PTT would delay calculations of fund unit prices and net asset values.

'The Securities and Exchange Commission has told us to use the closing price of the first day of trading when the stock is allowed to resume,'' he said.

Funds could not use PTT's last trading price of 368 baht on Thursday as it failed to reflect the impact of the court ruling on the company's fair value, he added.

Kampol Adsavakulchai, a senior executive at SCB Asset Management, said the company accepted buy and sell orders for its mutual funds yesterday, but that confirmation prices would have to wait until PTT shares could resume trading.

But at TMB Asset Management, the company suspended trade in seven index and equity funds outright.

''We simply can't calculate our net asset values right now, so we have decided to suspend trading for the funds,'' said Jotika Savanananda, managing director of TMB Asset Management.

Under SEC rules, fund managers may suspend trade for a fund for one day, but must seek explicit permission for longer delays.

The SET index, meanwhile, rose 0.4% in mixed trade as investors debated the long-term impact of yesterday's court ruling on market giant PTT Plc.

The index rose as high as 843.99 points in morning trade after the court announced that PTT would not be delisted, but fell later on uncertainties about the implications for the company. The index closed the day at 836.4 points, up 3.31, in trade worth 17.08 billion baht.

Trading of PTT stock was suspended yesterday due to the ruling.

Authorities said trading was likely to be suspended until after Tuesday's cabinet meeting, when ministers would formally approve the transfer of PTT's pipeline assets as ordered by the court.

Patareeya Benjapolchai, the SET president, said the normal 30% trading floor and ceiling limits would remain in effect for PTT once trading resumes.

''Turnover on the SET today was over 17 billion baht, reflecting the fact that investors remained quite confident even with the PTT suspension. For over three months, investors have worried about this case,'' she said.

Analysts expressed mixed views about the impact of the court ruling on the energy company. Krisda Sawamiphakdi, a managing director of SCB Securities, said that stripping away PTT's pipeline assets would cut 100 billion baht from the company's balance sheet and reduce its share value by 50 baht each.

He noted that over the past several weeks, PTT shares had already fallen by as much as 100 baht to reflect investor concerns about the court ruling.

Longer-term, PTT would forego revenues gained from the pipeline network and instead would have to pay rent to the Finance Ministry for its use, resulting in higher operating costs.

''I think the picture will become clearer next week, and local and foreign institutional investors will come back to PTT, which is the flagship stock for the Thai market,'' Mr Krisda said.

Fredrick Wong, a senior analyst at UOB Asset Management in Singapore, expressed surprise at the ruling requiring pipeline assets to revert to the state.

''The ruling is something that was not expected by us. Although you might see it as positive for the company, I would not buy any more shares than I already have,'' he said.

''With this ruling there's more uncertainty in the Thai market, apart from the upcoming elections and the prospect of a ban [on People Power Party.] If I did have to buy Thai stocks, we would look elsewhere, such as consumer-driven companies or those benefiting from higher public spending.''

Kongkiat Opaswongkarn, the president of the Federation of Thai Capital Market Organisations, said foreign investors viewed the case as unusual given that PTT had been listed on the market for five years.

''We now have to wait and see how the talks will go between PTT and the Finance Ministry about the transfer of the gas pipelines back to the state. Nobody knows all the details yet,'' he said.

Dr Kongkiat, also the chief executive of Asia Plus Securities, estimated the fair value of PTT at around one to 1.3 trillion baht, or 430 to 470 baht per share.

''Personally, I don't see PTT share prices falling significantly, considering that prices have already dropped by 100 baht to reflect the possibility that the pipeline assets would revert to the state,'' he said.

Bangkok Post