The stock market index in both Thailand and abroad is constantly changing. It must be acknowledged that various factors arising from changes throughout the year impact price indices in different ways. These issues remain a topic of debate among investors about how we can stay ahead or benefit from the changing seasonal data.

Research and analysis of past events have led to the summarization of various theories that can partially explain the changes in stock prices or market indices affected by events at different times.

Various Impacts in the Stock Market

January Effect, December Effect, and Santa Claus Rallies

These three phenomena are quite similar. The first occurrence is the December Effect, which usually happens in the week before and after Christmas, where the stock market tends to decline. This is because most investors sell their stocks before the year-end to realize their investment results for that year and also to reduce tax liabilities. Next is the January Effect, which is the recovery of the stock market in the first week of January, resulting from investors buying back stocks they sold at the end of the previous year. Sometimes, this effect can begin even before the year ends due to speculation by traders in the stock market, leading to the Santa Claus Rally in late December, although this impact is not as strong as the January Effect.

September Effect

According to statistics from the U.S. stock market, September is often the month when the index hits its lowest point of the year. However, this does not always occur and depends on the market trend at that time. The explanation for the September Effect is that the end of summer is followed by Labor Day on the first Monday of September, which is a holiday. This results in a tendency for consumer spending to decrease in September, and this month also marks the beginning of the third quarter, which is typically the weakest economic period of the year. However, after this period, the economy and consumer spending tend to increase as we enter the high season towards the end of the year.

Turn of the Month

Historical data over the past several decades from stock markets worldwide shows that the stock index tends to be highest in the first 2-3 days of the month and at the end of the month, while it is lowest in the middle of the month. This is due to the operational processes of various mutual funds, primarily LTF or RMF funds, where investor cash is typically invested through mutual funds within 6-8 days from the end of one month to the beginning of the next. This creates significant buying pressure from funds during that period. However, the buying of stocks by mutual funds is not the only reason for the Turn of the Month phenomenon; some researchers hypothesize that part of the buying pressure from investors is psychological, as people tend to feel wealthier and spend more at the beginning and end of the month compared to the middle.

Turn of the Quarter

Compared to the Turn of the Month, this event is similar in timing, as the stock market tends to be active and rise at the end of the quarter. Additionally, there is another action by funds known as "Window Dressing". Fund managers, who are required to report their operational activities and fund performance quarterly, often buy stocks that performed well during that quarter to make their investment portfolios more appealing. These actions can significantly impact the stock market index because the amount of investment from funds is substantial compared to other types of investors. While Window Dressing is not illegal, it can be considered unethical. Most reputable fund managers avoid such practices, but it is believed that these actions occur quite frequently in the capital market.

Blue Monday

It is well known that Mondays, or the start of the workweek, are the days when people feel the least motivated, both psychologically and statistically in the stock market. Research on historical data from the U.S. stock market over the past 30 years shows that the average daily return from Tuesday to Friday ranges from 0.4% to 0.8%, while the average daily return on Mondays is around -1%.

Other Factors in the Thai Stock Market

Performance and Dividend Payments

            Companies listed on the stock market are required to submit quarterly performance summaries to inform investors and the stock exchange of company movements. This leads to speculation or buying pressure on stocks based on expectations of good performance during quarterly announcements. Additionally, there is buying pressure from investors for dividend announcements, as these reflect good company performance and provide returns to shareholders. Such speculation often occurs at the end of the year when most listed companies announce dividend payments.

Commodity Prices

            Commodities are generally divided into five groups: energy products, industrial metals, precious metals, agricultural products, and livestock products. The prices of these commodities tend to change rapidly in response to specific events. For example, crude oil prices rise immediately upon news of OPEC reducing production or when there are reports of a prolonged winter increasing energy demand. Similarly, agricultural products like rice may see price increases when news emerges that rice-producing countries are experiencing drought, leading to lower-than-expected yields. When considering the impact on listed companies in the stock market, the prices of each type of commodity can create short-term buying or selling pressure on companies involved with those products, whether as sellers or as cost inputs.

Economic Indicators

            The announcement of various economic indicators, such as export figures or revised GDP forecasts, can psychologically influence investment decisions for both domestic and foreign investors, leading to buying or selling pressure on the stock market index. For example, if Thailand's GDP forecast is revised downward, it may lead foreign investors to adjust their investment portfolios in Thailand downward due to reduced expectations for returns.

Article by: TerraBKK Investment Tips

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