The Thai stock market experienced significant turbulence in 2023 due to scandals, defaults, and volatility. This resulted in a loss of investor confidence and highlighted the necessity for regulatory reforms.

Thailand is planning to tighten listing regulations in response to recent accounting scandals, debt defaults, and share price fluctuations that have shaken investor confidence.

The proposed changes include increasing the ratio of free-float, setting a higher threshold for profitability and shareholder’s equity, and applying the new rules to smaller companies as well.

Thai stocks are underperforming compared to their Asian counterparts

Thai stocks have been the worst performers in Asia this year, with foreign investors offloading a net $3.1 billion so far. This makes it the highest amount among Asia’s emerging markets. Excessive volatility in some shares, including the nation’s most valuable company, and an accounting scandal that led to a bond default at a listed electric cables maker are among the latest events that have shaken investor confidence.

The scandals uncovered in 2023 have underscored the necessity for enhanced regulations, transparency, and disclosure practices in the Thai financial markets. These measures are crucial for reinstating investor confidence and averting similar incidents in the future.

Thai bourse scandals in 2023

The year 2023 has been a turbulent one for the Thai stock market, as several scandals, defaults and volatility have shaken investor confidence and prompted regulatory reforms. Here are some of the major events that have rocked the Thai bourse this year:

• In June, the Stock Exchange of Thailand (SET) announced a sweeping revamp of listing regulations, aiming to increase the ratio of free float, set a higher threshold for profitability and shareholder’s equity, and enhance disclosure and governance standards. The move came after a major accounting scandal at Stark, an electric cables maker that defaulted on its bonds and revealed irregularities in its financial statements for the past two years.
• In September, Nok Air (DD), a low-cost carrier, faced the threat of delisting from the SET after failing to submit its financial statements within the required timeline and posting negative shareholder’s equity for three consecutive years. The airline has been struggling with mounting losses, debt restructuring and the impact of the Covid-19 pandemic on the aviation industry.
• In October, Delta Electronics (Thailand) (DELTA), the nation’s most-valuable company by market capitalisation, saw its share price plunge by more than 40% in a single day after the SET imposed trading curbs on the stock. The exchange said the company failed to explain the reasons for a sharp rally in prior sessions, which raised concerns about excessive volatility and possible manipulation. Delta attributed its share-price fluctuations to “market conditions and external factors beyond our control” .

Stark Corporation, a wire and cable manufacturer, has been involved in a major financial scandal. Executives and subsidiaries of the company are accused of doctoring financial statements, engaging in fraud, and money laundering.

The fraud has resulted in an estimated financial damage of 14.78 billion baht and has affected nearly 5,000 investors. The scandal has raised concerns about the competence of auditors and the slow response of law enforcement authorities, undermining investor confidence in the market governance.

The Department of Special Investigation (DSI) and the Anti-Money Laundering Office (AMLO) are also investigating the case. The scandal has led to a revision of rules on backdoor listing and has raised questions about the competence of auditors and law enforcement authorities.

The watchdog’s oversight was challenged by the Stark scandal, but it wasn’t the only case. The SEC also took legal action earlier this year over the alleged manipulation of More Return Plc (MORE) share price. In June, the regulator filed a complaint against 32 individuals for their alleged involvement in the 800-million-baht share manipulation of MORE.

These incidents have tarnished the reputation of the Thai bourse, which had previously aimed to surpass Singapore’s market capitalisation by 2023. The SET has been trying to restore investor confidence by strengthening its supervision, enforcement and education functions, as well as promoting more sustainable and responsible business practices among listed companies.

However, some analysts and investors have called for more drastic measures, such as delisting or suspending problematic stocks, imposing heavier penalties for misconduct, and improving corporate governance and transparency standards across the board.

Thai Bourse Scandals brief history

The SET has not been immune to scandals and controversies over the years, which have tarnished its reputation and undermined investor confidence. Here are some of the most notable cases of fraud, corruption, and misconduct that have rocked the Thai bourse in recent history.

The CP All Case

CP All is the largest operator of convenience stores in Thailand, with over 12,000 outlets under the 7-Eleven brand. In 2013, CP All announced its plan to acquire Siam Makro, a cash-and-carry wholesaler, for 188.9 billion baht (US$5.6 billion). The deal was the largest ever in Thailand’s retail sector and one of the biggest in Asia.

However, the SEC later found that CP All’s executives had engaged in insider trading before the announcement of the deal. They had bought Siam Makro shares using information that was not yet public, and made huge profits when the share price surged after the announcement. The SEC fined CP All 33.3 million baht (US$990,000) and its executives a total of 1.1 billion baht (US$32.7 million) for violating the securities law.

The Thonglor Petroleum Case

Thonglor Petroleum was a company that claimed to be involved in oil exploration and production in Thailand and abroad. In 2014, Thonglor Petroleum listed on the Market for Alternative Investment (MAI), a subsidiary of the SET that caters to small and medium-sized enterprises. The company raised 150 million baht (US$4.5 million) from its initial public offering (IPO).

However, it soon became apparent that Thonglor Petroleum was a fraudulent company that had lied about its business operations and financial performance. The company had no oil assets or revenues, and had used fake documents and forged signatures to deceive investors and regulators. The SEC revoked Thonglor Petroleum’s securities trading license and filed criminal charges against its executives and auditors for fraud and forgery.

The JAS Mobile Case

JAS Mobile was a subsidiary of Jasmine International, a telecommunications company that operated broadband internet and cable TV services in Thailand. In 2015, JAS Mobile won a bid for a 4G license from the National Broadcasting and Telecommunications Commission (NBTC), beating out other major telecom operators. JAS Mobile agreed to pay 75.6 billion baht (US$2.2 billion) for the license, which was considered a very high price.

However, JAS Mobile failed to pay the first installment of 8.04 billion baht (US$238 million) by the deadline set by the NBTC. JAS Mobile claimed that it could not secure financing from banks due to unfavorable market conditions and regulatory uncertainties. The NBTC revoked JAS Mobile’s license and confiscated its bid guarantee of 645 million baht (US$19 million). The SEC also investigated JAS Mobile for possible market manipulation and false disclosure.

These are just some examples of the scandals that have plagued the Thai bourse in recent years. These cases have exposed the weaknesses in the regulatory framework and enforcement mechanisms of the Thai capital market, as well as the lack of corporate governance and ethical standards among some listed companies. To restore trust and credibility in the Thai bourse, more efforts are needed to prevent, detect, and punish any wrongdoing that harms investors and the public interest.