The Finance Ministry is suggesting the Stock Exchange of Thailand (SET) accelerate efforts to build trust and confidence in a bid to attract investment on the Thai bourse.
Finance permanent secretary Lavaron Sangsnit said in addition to a development plan for the capital market, the SET and Securities and Exchange Commission (SEC) must promote trust and confidence.
"In the past, there have been several cases of poor management that led to a loss of confidence. Investors are reluctant to invest in the market because of governance questions about why such incidents occurred," he said.
Mr Lavaron did not elaborate on these incidents. In the period after the fraud cases involving More Return and Stark Corp last year, trade volume on the bourse was lower.
There were also accusations of naked short selling on the Thai stock exchange, though no charges were filed.
SWIFT PUNISHMENT
Mr Lavaron said as a board member of the SEC, he wants to see the SET become an outpost for investment, swiftly building investor confidence, especially in cases of abnormal stock trading.
He said there have been many instances of abnormal trading, but punishment for rulebreakers has been significantly delayed.
The prime minister also emphasised bolstering confidence in the Thai capital market, calling for swift punishment of rulebreakers to ensure they face consequences within a clearly defined deadline.
"When individuals violate the rules and regulations of the stock market, the market must penalise swiftly and appropriately, not turn a blind eye. When foreign investors witness this, they are unlikely to invest here because they feel the dealers are fraudulent. As a consequence, they invest elsewhere," said Mr Lavaron.
"Investors can trade anywhere in the world, and returns are better elsewhere recently. Money has flowed out of the Thai market, and when events undermine confidence, the exodus quickens. If these trust issues can be addressed promptly, investors are expected to eventually return."
INITIAL PUBLIC OFFERINGS
Regarding initial public offerings (IPOs), he said historically these stocks have an immediate price dip when entering the market for trade.
"We must ask: What assumptions do business owners, financial advisors and the securities market base their selling prices on? It appears the selling prices do not match the IPO price," he said.
"The prices of the last 10 IPO stocks dropped significantly. How did the owners and financial advisors underwrite these prices? Does the market reaction reflect their true value or not?"
Mr Lavaron said capital outflows from the Thai bourse are related to more factors than reduced confidence. Many foreign stock exchanges posted higher returns on investment than the SET, while interest rates in Thailand have a gap of up to 4% compared to the rates of the US Federal Reserve.
Given these conditions, it is natural for investment funds to flow towards higher returns, he said.
The SET contracted 15.5% last year, the worst outcome globally among bourses, with foreign investors net sellers of 192 billion baht worth of Thai shares.
The outflows continued in the first two months of 2024, while average daily trading by retail investors declined significantly as several internal factors affected market confidence.
Retail investors have complained about the use of program trading, especially the use of high-frequency trading programs by foreign investors.
They also believe there is naked short selling, the practice of short selling shares that have not been affirmatively determined to exist, which is against SET rules. The bourse has repeatedly stated it could not find any evidence of this practice.
Average trading value on the SET has dipped to 35-50 billion baht per day from more than 50 billion in previous periods.
