This is why we love Small Mid Caps
I had begun creating this index since my role as an analyst at an investment management boutique firm here in Thailand, back in 2006, demonstrating how small & mid caps (SMCs) absolutely destroy large caps over time.
What we wanted to prove was that year in year out, SMC’s would constantly outperform (albeit they didn’t in 2008). Without giving too much information away on our methodology we used Morningstar’s definition of small, mid and large caps to create this index and each year we re-based it.
The evidence really just speaks for itself, each year you can find small caps or mid caps that increase in value, each year they generally outperform the index, and over time the compounded effect is just immense.
Curious
Dear Pon
Nice, we agree that SMC are great for investing in Thailand and great for conservative investors – on the whole.
I see that Morningstar’s methodology 80%/15%/5% of a market for arranging market cap of companies.
Question – so what Market Cap in baht or USD is the cut off for small companies to fit under in Thailand using this methodology? And, that does make them too small for most international Funds doesn’t it, which probably explains the value.
Follow up question – you didn’t mention microcaps ?
Also because of lower wages in Thailand, therefore less capital needed for a decent sized business, doesn’t this skew the market cap down when comparing with western countries?
Cheers
B
Pon
Hi,
Thanks for the comment, sorry for the slow reply.
To answer your questions:
1. As of end of 2011, a large cap would be a company with a mkt cap of THB 25 bil (USD 833 mn) and upwards, mid caps THB 3.7bn (USD 123mn) to THB 25 bil (USD 833mn), small caps THB 3.7 bn (USD 123mn) and lower
2. Most major international funds would have a minimum requirement of a USD 2 bn / THB 60 bn mkt cap, even amongst local institution funds/mutual funds regulators essentially make it difficult for fund managers to have a look at any company outside the SET50
3. We just decided to lump microcap and smallcaps together.
4. Not necessarily, too many factors would have to be considered, which industry the company operates in, where in the industry value chain the company operates in, you could perhaps make that argument it the company was 100% run on low-skilled labour.
Pon
Curious
Thanks