As fresh-faced retail investors flock to the stock and digital asset market amid the pandemic, Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco), is urging the government and related authorities to educate inexperienced investors to protect them from risks in a digitalised market.
According to the Stock Exchange of Thailand (SET), the Thai market currently has 4.38 million trading accounts in the system.
The number of investors has soared by 45% or 800,000 people -- the highest jump in decades -- from 1.8 million before the pandemic to 2.6 million people at present. Most new investors have an average age of 20-30 years, Mr Paiboon said.
Meanwhile, the Securities and Exchange Commission (SEC) also reported a rise in retail digital trading accounts, which reached a total of 1.16 million between November 2020 and May 31, 2021, surpassing the one million milestone in about seven months. Most new accounts were lured into the market through social media.
However, despite high risks associated with the digital market, investors are maintaining old investment behaviours which may result in self-inflicted damage and pose risks to the system.
Mr Paiboon said Thailand is not the only country that has seen a significant rise in retail investors as the trend is global.
Other regional markets such as the Indonesia Stock Exchange has also seen a 70% hike in retail investors during the pandemic, of which about 70% are investors under 30.
The number of retail investors in Vietnam also reportedly jumped 35% while the number jumped 20% in Malaysia, of which over 60% are investors between 26 and 45.
In addition to regional markets, the US stock market whose investor base mainly consists of institutional investors also saw an exponential rise in retail trading volume, which accounted for an average of 25% of its stock market last year. The contribution is almost the same as the combined trading volume of mutual funds and hedge funds.
He said the main factor amping up retail investors' interest in the stock market is record low interest rates which have caused people to seek returns from equity investments. Another factor is the global economic slowdown caused by lockdown measures that have reduced people's income.
In addition, working from home is also granting people more free time to learn about equity investment while technological developments are providing people more access to the capital market. Investors can now easily open a trading account from home and trade stocks through online systems provided by investment advisory platforms.
"I see an increase of young investors as a positive development and the Thai stock market should use this opportunity to expand its investor base by one million per year for the next five years to create a culture of investing to help people create long-term savings," Mr Paiboon said.
According to Mr Paiboon, the increase in investors also greatly benefits the Thai market. Since the beginning of 2010, the Thai stock market has risen 120% or about 10% per year in trading volume, with dividends of 3% per year, equal to average returns of 13% per year.
The government and related authorities should work to provide investment knowledge to a new generation of investors and give them the correct understanding of investments and urge them to invest in a sustainable manner with a focus on long-term gains.
The participation of more people in the stock market will help the country achieve more equal wealth distribution and help Thais save up for retirement, he said.
"However, there are still some concerns regarding new investors as they are still adhering to old investment behaviours and focus on short-term speculation rather than long-term investments," Mr Paiboon said.
Another worry is the use of social media channels that are not regulated by authorities which leads to investments in poor quality assets which eventually cause losses and leads to long-term effects on the market.
"It's time for the government to put the matter of financial and investment literacy on its agenda to provide Thais sufficient skills to manage their financial resources effectively and for the Thai capital market to continue growing sustainably," he said.