There are no signs of share manipulation even as the Thai bourse rose 9% in the third quarter, as most active trading involves large and medium-cap stocks on the SET100, says the market regulator.
The Stock Exchange of Thailand (SET) index has continued rising since Aug 25, from 1,575.83 points to above 1,700 points in October. It is the first time the bourse has remained above 1,700 points since the Asian financial crisis in 1997.
Investor sentiment boomed following ousted former prime minister Yingluck Shinawatra's decision to flee the country as the Supreme Court was set to deliver a verdict on her government's controversial rice pledging scheme on Aug 25.
A tranquil domestic political atmosphere, Thailand's burgeoning economic growth and revised GDP forecasts by policymakers and think tanks prompted an influx of foreign fund inflows.
Foreign fund flows into the Thai stock market totalled 16 billion baht between August and September.
The SET's market capitalisation increased from 15.1 trillion baht in 2016 to 16.9 trillion baht as of Oct 27.
As the bourse continues in its upward trend, questions on share manipulation have appeared in the minds of analysts, who have begun questioning whether the bullish stock trading was fuelled by manipulation of certain share prices.
"Considering the current rising share prices, it has been found that most [of the stocks] are in the SET100, including large and medium-cap equities, so share manipulation for those stocks is quite difficult due to their [market] size," said Anek Yooyuen, director of the enforcement department at the Securities and Exchange Commission (SEC).
"Those shares are also not on the turnover list, which is the tool indicating irregularities in share price trading."
Data of stocks on the turnover list for three months, between mid-August and mid-October, comprised 37 securities, including 17 derivative warrants. It was determined that those securities remained on the list for the entire three-month period, while most of them were identified as small-cap stocks, according to the SET.
Normally, share manipulation is done through small-cap stocks, as it is easier to control the price movement with small amounts of money. For large-cap stocks, it is difficult to speculate as much larger amounts are needed.
But the current process of share manipulation is more complicated as the offender can act in concert with associates to drive up the price of a particular stock. There is also a weakness in legally enforcing the rules of the Thai capital market, as all of the evidence has to be clearly established prior to filing a criminal lawsuit. Complicated procedures for enforcing laws related to the SEC further put retail investors at a disadvantage.
"Most share prices have rallied so far, but there are some stocks whose share prices have risen significantly, so we need to check what are the key factors driving them up," said Mr Anek.
The inspection process covers the turnover list, corporate business plans and the performance of business operations, he said.
"If a certain share price continues rising without any good supporting [factors], it is possible that the movement is irregular," said Mr Anek.
He said the SET has a duty to check share price irregularities, with the first step including disclosing shares on the turnover list each week.
If irregularities are found then the bourse will send the case to the SEC for closer inspection. The SEC will then gather evidence, file the case with an attorney and pass it to the Department of Special Investigation (DSI), the Criminal Court or the Civil Court, depending on the case. The court process for investigation and case adjustment can take up to 10 years to complete.
Case adjustment entails long-drawn-out procedures and there have been many instances when cases were dropped by the attorney or DSI. But the new SEC Act provides better protection for investors through civil sanctions and civil penalties, preventing insider trading or any unfair misconduct by listed firms' boards of directors, management executives and/or the media, said Mr Anek.
Poranee Thongyen, senior executive vice-president at Asia Plus Securities, said the SET index has risen due to Thailand's improved economy and listed firms' earnings growth, as well as how the Thai bourse is considered a laggard market compared with regional peers.
"Those factors have attracted fund inflows and greater domestic political stability since late August, adding to bullish investor sentiment," said Mrs Poranee.
The Thai stock market has boasted a bullish outlook after the announcement of next year's election roadmap by the junta-led government, she said.
