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When one talks about stock indices, the first index that comes to mind for most local investors is probably the Stock Exchange of Thailand (SET) Index. The index was first established on April 30, 1975 and the initial starting point was 100. The SET Index is a market capitalisation weighted index, which means that all the outstanding number of shares are multiplied by the closing prices in order to derive at an index value. In this way the price movements of large capitalisation stocks will have greater effects on the movement of the SET Index than smaller capitalisation stocks. |
SET Index = (Current Market Value) x 100 (Base Market Value) |
Kindly note that the above formula only represents the basic building block for the index. In practice, however, several adjustments have to be incorporated into the formula in order to take into account the various corporate actions such as rights issue, stock splits, dividend etc. Moreover, preferred shares and warrants are not included in the calculation of the index. In addition to the main index, there are the SET-50 and SET-100 Indices, which were established in 1995 and 2005 respectively. Both indices are essentially the same, but the SET-50 Index represents a smaller universe of only fifty stocks. Adjustments to the SET-50 and SET-100 are carried out twice a year where fifty/one hundred of the biggest common stocks in terms of market capitalisation and most liquid stocks are selected from a list of 150 stocks. |