Investor confidence in the stock exchange remains shaky in the second half of the year as concerns over small- and mid-cap companies' ability to repay their debts mount after reports of financial turmoil and irregularities in some SET-listed firms.
Trading volume has been down for over a month as problems at the flagged firms deepen.
Viwat Techapoonpol, deputy managing director of Tisco Securities, said retail traders, traditionally the largest group of investors on the Stock Exchange of Thailand, are more cautious about small- and mid-cap stocks because some of these firms have failed to repay debts or filed for business rehabilitation at the Bankruptcy Court.
Trading suspensions of these cash-strapped firms have resulted in losses to over 50,000 investors, fuelling a substantial reduction in trading volume.
Investors are putting off purchases of small- and mid-cap stocks, and even big-cap companies have reported lower net profits than expected in the second quarter.
The market has reacted by selling these underperforming stocks, keeping trade rangebound.
According to the SET, average daily trading has dipped 14% to 43 billion baht since last August.
Retail trading has steadily declined since 2015, when it was 65% of overall trade, to 49% this year. Post-suspensions, retail trade fell to 39.5% in July and 37.5% in August.
"Low investor confidence has caused speculative trading activities on the SET to decline significantly, as retail investors had dominated trading in the stock market for the past four decades," said Pattera Dilokrungthirapop, chairwoman of the Association of Securities Companies. "Retail trading has plunged below 50% for the first time in the SET's history."
The five troubled companies are Group Lease Plc (GL), Energy Earth Plc (EARTH), Polaris Capital Plc (POLAR), Inter Far East Engineering Corporation Plc (IFEC) and KC Property Plc (KC).
Group Lease's share price has been in a tailspin, with a 70% slump from its peak to about 20 baht, hurt by an auditor's notice over its lending to overseas subsidiaries and top management's involvement in a legal dispute in Japan.
Energy Earth, Polaris, IFEC and KC have been debt defaulters, and regulators have asked them to do special audits.