The Thai capital market has faced numerous challenges so far this year, leading to a decline in trading volume and the SET Index dropping to five-year low. This underperformance is attributed to a combination of global and domestic factors, prompting a crucial discussion on how to restore confidence and stimulate market activity.
According to Professor Emeritus Kitipong Urapeepatanapong, Chairman of the Stock Exchange of Thailand (SET), in an exclusive interview with “Kaohoon,” the market has been hit by multiple “storms,” including global trade wars and international conflicts such as the Russia-Ukraine and Hamas-Israel wars, which have a significant impact on Thailand. Domestic issues also contribute, as the overall Thai economy faces challenges. Although GDP and exports showed some improvement in recent months, investors perceive that Thai stocks are generally not performing well, leading to declining prices.
Immediate Measures and Addressing Fairness
In response to these challenges, the SET is implementing several short-term measures. Efforts are being made to enhance confidence through law enforcement and addressing corruption, an issue that has reportedly lessened recently. To ensure fairness, especially for retail investors, restrictions are being placed on short selling, limiting it specifically to stocks within the SET100 index.
Measures are also being taken concerning high-frequency trading (HFT) and robot trading to ensure retail investors have more equal access to information and trading capabilities—potentially through initiatives like colocation services, expected in the second or third quarter. While these measures are seen as improvements compared to the past, the Chairman notes they address only part of the problem; the fundamental issues with Thai businesses remain key. The SET’s role is largely that of an intermediary and facilitator, aiming to provide an efficient platform, use AI, help listed companies reduce costs, and improve investor access to accurate information.
Long-Term Strategies: New Engines and Legal Reform
Recognising that the core issue lies with the underlying companies and attracting new, attractive listings, the SET is focusing on longer-term strategies. A key direction is to introduce “New Economy” businesses, potentially including foreign companies, to the market. This involves collaboration with entities like the Board of Investment (BOI), though it is acknowledged that regulatory hurdles and complex rules mean this will take time.
Another significant development expected soon is the implementation of a Royal Decree allowing companies to buy back their own shares (treasury stock). This is seen as a way to stabilise the prices of good companies’ shares.
A crucial and overarching theme is the need for comprehensive reform of Thailand’s capital market laws. The Chairman stresses that the entire legal structure needs an overhaul, affecting areas like the Public Company Act (e.g., allowing different share classes), fundraising, and liability. The current process of amending laws piece by piece is slow and challenging due to the need for consensus across multiple government agencies.
A “Guillotine” or “Omnibus” approach—revising laws across various acts (Public Company Act, Securities Act, SET and SEC rules) simultaneously—is advocated to make processes easier, faster, and more cost-effective for market participants, thereby enhancing competitiveness. This requires a strong directive from the government (“tone from the top”). Incentives beyond listing, such as faster tax refunds or lower interest rates, should also be considered to attract companies. Furthermore, the capital market must drive progress in ESG (Environmental, Social, Governance) areas, as its health is linked to the well-being of stakeholders and society. The government’s role is seen as a facilitator rather than purely a regulator.
Establishing a Holding for New Economy
The Chairman explains that the SET is exploring different approaches for listing several types of businesses, which may not fit the traditional listing criteria—such as requiring three years of profitability. He floats the idea of revising the rules to focus on potential rather than solely past performance.
One specific concept being studied by the SET is the idea of grouping smaller “New Economy” companies together to form a larger holding company. This holding company could potentially include startups with promise, including those originating from educational institutions. The aim is to enable investors to invest in this larger entity, possibly through a disclosure-based listing approach.
Under this disclosure-based model, investors would be fully informed of the associated risks but would have the opportunity to invest directly in a portfolio of these companies—similar to investing in venture capital (VC). The Chairman notes that the SET is evaluating whether this could be implemented via a fund structure open to all investors.
The Chairman highlights importance for this approach, underscoring the process to strengthen businesses under the holding company to flourish. This also eliminates several paper works that need to be done and all business arms can focus on their operations. Thanapiriya Public Company Limited (mai: TNP) and K&K Superstore Southern Public Company Limited (mai: KK) were raised as an example for this VC or even a merger. As a retailer and wholesaler, TNP is well-known in Northern Thailand, while K&K Superstore is known by locals in Southern Thailand. However, their growth could stop short of just that without expansion nationwide. This is when the partnership or VC comes to play.
This pooling or portfolio approach is being considered because individual startups or New Economy companies typically have a higher risk of failure. By investing in a diversified portfolio, the potential success of a few companies could offset losses from others—even if a significant portion (e.g., 90%) underperforms. This strategy aims to provide investors with access to high-growth sectors while managing risk.
In summary, the core idea is to bundle smaller New Economy companies under a single holding company to create a larger, more investable entity. The SET is then exploring innovative listing mechanisms—such as disclosure-based listings or fund/token structures—to provide broader investor access and support the development of Thailand’s New Economy sector.
Investor Education and Prudence
The Chairman also addressed investor behaviour, noting a tendency towards short-term trading and speculation based on rumours rather than fundamental analysis. While the SET provides considerable information and research, investors need to actively study companies.
Chairman’s Advice
Navigating the current challenging market environment requires investors to be steadfast and study information thoroughly before making decisions, potentially consulting brokers or advisors. Careful analysis helps mitigate the risk of significant losses. Adopting a long-term investment perspective—perhaps similar to approaches like Warren Buffett’s—by focusing on fundamentally sound Thai companies and collecting dividends, can be beneficial. Diversification across good Thai stocks, foreign funds, and foreign stocks is also recommended. Investors are cautioned against greed and urged to rely on knowledge and careful study rather than rumours.
