Stock market regulators confirmed on Thursday that they have no plan to ban short-selling after the Stock Exchange of Thailand (SET) fell sharply to below 1,400 points before recovering slightly in afternoon trade.
The SET and the Securities and Exchange Commission (SEC) held an urgent media briefing after the bourse closed at 5 pm to reassure investors that no such change was on the way.
SET president Pakorn Peetathawatchai said the volume of short-selling in the Thai exchange is not high, at around 5-6% of total trading, which is similar to the 2022 figure.
Most of the short-sell transactions are made by foreign investors and such trades mainly involve big-cap stocks in the SET50.
The use of program trading is also at normal levels, said Mr Pakorn. The High Frequency Trading (HFT) system accounted about 10% of total turnover and market regulators monitor it closely. They have found no abnormalities so far, he added.
SEC secretary-general Pornanong Budsaratragoon said the regulator had not found anything suspicious arising from short-sell trading on the local stock market.
Short-selling involves borrowing shares that an investor believes will fall in price and selling them in the market. When the price falls, the investor buys the shares back and returns them to the broker, pocketing the difference.
Short-selling transactions are beneficial in boosting liquidity in the market, said Ms Pornanong, adding that such trading remains at a controllable level.
Concerns were raised among investors in Thailand after South Korean regulators reimposed a ban on short-selling in order to investigate irregularities. The ban will last at least until June 2024.
“The SEC investigated and found no abnormal trading among all groups of investors, including ‘naked shorts’ or selling stocks without actual stocks in the portfolio,” said Ms Pornanong.
After falling by almost 1.4% in the morning, the SET index rebounded in afternoon trade to finish at 1,404.97 points, down 0.48%, with trading value of 49.74 billion baht. The index dropped to a low of 1,389.46 around midday.
“This year has been a challenging year for the Thai stock exchange,” said Mr Pakorn. “Market sentiment is not good and foreign capital has been constantly flowing out with both external and internal factors hurting investors’ confidence.”
Foreign investors have been net sellers of 7 billion baht worth of Thai shares so far this month, and 180 billion for the year to date. That compares with a net-buy position of 202 billion baht for all of 2022.