Bourse tightening market surveillance

Bourse tightening market surveillance

Move offers better investor protection

The Stock Exchange of Thailand (SET) is preparing to tighten its market surveillance rules to enhance its control over securities with unusual price movements, reduce investment risks and provide more protection for investors.

The bourse has conducted a hearing process to collect public opinion on the rules revision. The hearing will end on Nov 12.

According to the document filed at the hearing, the SET will revamp market surveillance measures to better regulate stocks with irregular price movements or those whose prices rise or drop without fundamental changes.

The market surveillance measures currently consist of three levels -- cash balance, exclusion from credit limit and the prohibition of a net settlement.

With the revised measures, the prohibition on the use of stocks in trading calculations will be included in the first level, the prohibition of net settlement will be included in the second and a one-day suspension of trading will be included in the third.

The SET is waiting to see the results of the hearing and will consider the announcement for the effective date again.

Asia Plus Securities (ASPS) said the new measures may cause the trading value of many stocks in the SET50 and SET100 Index that are frequently imposed a cash balance status or put on a trading alert list to drop. Some of them may be removed from the indices.

ASPS analysts said the SET's revision and intensification of the rules will affect the trading of some large stocks with a low proportion of free-float shares and high speculation.

These stocks may be excluded from the SET50 or SET100 Index, especially Delta Electronics (DELTA) because it has already been imposed a cash balance status for seven months and therefore is unlikely to pass the liquidity criteria for the indices which specify a stock must be without any market surveillance label for at least six months a year.

Analysts also said the SET has also recently concluded a hearing on the revision of the selection criteria for its stock indices to reduce volatility.

With the new criteria, the free float-adjusted market capitalisation will be used to be calculated for stocks to be listed on the indices in the first half of 2022. The bourse is also developing a clear definition for free-float stocks and strategic partner for smooth transitions in the next phase.

The analysts said some large-cap stocks with low free-float will recover in the short term before the change in the calculation criteria is implemented, including Airports of Thailand, Gulf Energy Development, PTT Oil and Retail Business, Advanced Info Service, PTT Exploration and Production, Global Power Synergy and Berli Jucker.

ASPS said stocks expected to enter the SET50 and SET100 Index in the first half of 2022 include Ngern Tid Lor and Bangkok Life Assurance.

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