Regulators' move to cool down small stocks by extending the required cash-balance period is unlikely to hurt the prevailing positive investment climate.
Last Friday, the Stock Exchange of Thailand (SET) extended the period required for cash trading of stocks on the cash-balance list to six weeks from three earlier.
Investors wanting to trade the shares must deposit cash in their trading accounts in full before they can start buying instead of trading on credit and settle the balance in a few days like other stocks. The adjustment will be effective from March 1.
Chanitr Charnchainarong, executive vice-president of the SET, said the revision would affect only shares with unusually active trading.
Fundamental stocks should move normally and continue to benefit from the positive sentiment.
The SET index rose 1.77 points, or 0.12%, to close at 1,523.29 yesterday in trade worth 48.54 billion baht on the report of historic economic growth of 18.8% in the last quarter of 2012.
"We have to do this. We can't allow investors to trade some shares so heavily for no good reasons. If we let it go on like this, there would be a great risk of market collapse which will hurt everyone," said Mr Chanitr.
He said the SET had to caution investors about irregular movements of some stocks which drove their market value to unrealistic levels.
Since the rule does not affect fundamental stocks, he is confident the SET index will reach 1,700 points as many brokers predicted. "The index should be propelled by blue-chip stocks, not non-SET100 ones. Also, most of them are overpriced now," said Mr Chanitr.
He said foreign investors bought blue-chip stocks such as those in the banking, energy and petrochemical sectors but sold property shares in January.
Pattera Dilokrungthirapop, chairwoman of the Association of Thai Securities Companies (Asco) said the SET and Asco yesterday had allowed S&P Capital IT Company, a subsidiary of S&P Credit Rating Agency, to provide financial information of those stocks in the SET101-250 group to brokers.
"This will allow brokers to research more on small stocks for customers," said Mrs Pattera.
She said the project was initiated last year to increase trading liquidity of medium- and small-cap shares, which was thin then.
"But things have changed since. Currently, the market moved largely by these non-SET100 stocks," she said.
The testing period was set for March. Brokers will see the information provided by S&P Capital IT and more research on small and medium-cap stocks should be available to help investors soon after that is supplied.
About the author
- Writer: Darana Chudasri
Position: Business Reporter