Regarding market surveillance, cases connected to unfair trading have been identified that included 58 cases involving price manipulation and insider trading, and 24 cases where securities companies and their officers were punished mainly for infringements in trading orders, as well as other unacceptable practices.
Securities Trading
"The trading of securities shows a higher turnover and liquidity even though securities investments were severely affected by the terrorist attack in the U.S.A. in September. The SET index on 25 December 2001 closed at 301.81, up 12% compared to the end of 2000 at 269.19. Daily average turnover rose 70% from last year's level. Daily average turnover was as high as 6,352.82 million baht (as of 25th December 2001), while that in 2000 was only 3,739.66 million baht. This would appear to be a result of the government's support in reviving the health of the capital markets, which has been an important factor in building up investor confidence. Moreover, two further contributing factors have been first, the successful privatization of the two SOEs-Internet Thailand Public Co Ltd and PTT Public Co Ltd - plus secondly, the decrease in the par value of 15 listed companies," said Mr. Kittiratt.
The market capitalization in 2001 increased from 1.30 trillion baht at the beginning of the year, to 1.67 trillion baht as at the 25th December 2001, due to the listing of 10 companies plus the privatization of the SOEs, and also an increase in share prices in the market.
Regarding the Internet trading of securities, at the end of 3rd quarter of 2001 (Jan.-Sep.), there are a total of 13 securities companies providing the services to 7,035 customers. Total securities trading via the Internet recorded 8,662 million baht, which accounted for 0.36% of total market turnover.
The expansion of the investor base was close to the target. Various activities were held to increase the number of retail and institutional investors, such as the Investor Fair and similar events. As at 30th September 2001, the number of investors in the market was recorded at 205,392 persons. The SET has also initiated a Youth Development Program - the SET Junior Achievement Thailand or SET-JAT - to introduce economics to Thai youth, and which students from various institutions warmly welcomed. At the same time, the Thailand Securities Institute (TSI) has also developed four training programs for licensing securities officers. There are already 592 persons who have received training who will add to the quality of human resources in the market.
The SET has improved its information services. The SET website was revamped to be a resource center for the Thai Capital Markets, and to be a site responsive to investor needs. The number of visitors to the site increased over two-fold from 3,000 visitors a day before the site revamp, to 7,500 visitors at present. The SET also provides a Call Center to answer any queries by phone.
Increased Supply, Product Development and Support for Listing of Privatized SOEs
"In regard to an increase in supply that is vital to the development of the market, there were altogether 10 new listings on both the SET and the MAI, worth 33,193 million baht. Most of the companies obtained their listing in the second half of the year in response to the government's tax incentives over five years in support of the Capital Market. Listed companies on the SET will enjoy corporate tax reductions from 30% to 25%, while those listed on the MAI will enjoy a reduction from 30% to 20%. Currently another anticipated IPO is Chuo Senko (Thailand) Public Co Ltd is expected to list on the MAI in early 2002," the SET President said.
The SET has implemented many proactive marketing strategies to lure in more Listed Companies. It offers both pre- and post-listing services such as advisory services, training services, and promotional activities. Moreover, the SET has recently launched an affiliated website, www.thaicapnet.com, to act as an information platform for small- and medium-sized enterprises, venture capital businesses, as well as other businesses, to
provide opportunities for them to do business together. Furthermore, the SET fully supports the listing of privatized SOEs. Facilities for this include advisory services on the privatization process, facilitating the listing process, initiating an IPO subscription service via the Internet for the first time, for Internet Thailand Plc, and helping out with promotional campaigns to increase public understanding of the privatization process in close cooperation with the Office of State Enterprises and Government Securities of the Ministry of Finance.
This year the SET has adjusted the regulations to fully support the listing of companies, to be in line with government's tax incentives scheme and the listing of privatized SOEs. The listing fee was cut by 50% on average. Having Good Corporate Governance practices issued as a guideline aimed at encouraging good corporate governance. Listed companies were instructed to publish in their annual reports the 15 items of corporate governance practices, as described in the manual, starting from the 31st December 2002 issue . They will have to submit the report to the SET by April 2002. If they fail to do so, they must supply reasons in order to show that they have given attention to the development of good corporate governance systems, to help equip shareholders and investors with the information necessary for making informed investment decisions. Furthermore, the SET also held educational seminars to assist in the comprehension of the roles and responsibilities of audit committees, in order to support the development of good corporate governance systems.
In addition, the SET supported the 'Good Corporate Governance Practices Award 2001' by the Institute of Internal Auditors of Thailand, to honor companies with good corporate governance practices. In 2001, there were three listed companies awarded: the Electricity Generating Public Co Ltd, TISCO Finance Public Co Ltd, and the Thai British Security Printing Public Co Ltd.
"The SET, in cooperation with the Ministry of Commerce, supports enhancing the strengths of Listed Companies by encouraging them to repurchase their shares from December 2001 onwards, to help provide them with a wider range of financial management tools. The SET also set up the Investor Relations Club (IR Club) to encourage the establishment of IR Units in Listed Companies, to help add value, increase their attractiveness and increase investor confidence. The SET has held a number of seminars to help develop the skills of Listed Companies' personnel and keep them up to date with industry developments, without charging any fees. The issues highlighted were, for example, the preparation of financial statements under the new accounting standards, and the Public Company Act II. These will help to strengthen Listed Companies and attract both investors and businesses to invest in the market, which is good for the market overall," said Mr. Kittiratt.
Besides increasing the supply in the market, the SET has introduced Non-Voting Depository Receipts, or NVDR, which is a new type of product to the market. The SET
has also recently launched a Derivatives Market website, distributed related documents on this, and held educational seminars on Index Options to familiarize the market with another new product before its trading commences in the near future.
Capital Market Restructuring to Resolve Fundamental Problems in the Securities Business and Increase Liquidity
"In adjusting the Capital Market structure, the SET has reviewed the liberalization of brokerage fees in the light of current market conditions, and finally determined that the minimum rate should be 0.25% for all types of customer accounts. The adjustment is intended to mitigate the problems arising intense competition in the securities business that negative affected securities industry after brokerage fees were first liberalized. This threatened to damage no only the securities industry but the Capital Markets as a whole.'
'In adjusting the rules and regulations to increase market liquidity, the SET has reviewed the price spread to help ease the trading of securities, especially those with relatively low prices below 10 baht per share. The SET also adjusted the proportion of minority shareholders required in newly listed companies from a proportion of 15% to 20% of the companies' registered capital. For existing listed companies, the proportion was increased from 10% to 15% of registered capital. Meanwhile, the ceiling of trading orders was lifted to 10 million shares for securities listed on both the SET and the MAI, to help facilitate trading activities, " Mr. Kittiratt said.
Service Improvement for Investors, Listed Companies, Securities Companies and Related Parties
The SET is committed to excellence of service by continually improving service quality by enhancing transparency, convenience, and the speed of operations, whilst at the same time reducing the costs and risks to the parties concerned. In this regard, the Back Office Service Bureau was established to offer back office services to securities companies in October 2001.
In regard to the major operations of the SET affiliates, the share registration system of the Thailand Securities Depository Co Ltd (TSD) prepared to be 100% scripless, is expected to start in early 2002. Meanwhile, the TSD has considered narrowing the share registrar interval from one and a half hours (13.00-14.30 hours) at present to 45 minutes (13.30-14.15 hours) in order to reduce risks while at the same time increasing the efficiency of the securities clearing and settlement. This new interval will be applied from January 2002. Moreover, the TSD has inaugurated a Call Center to respond to customers' queries via the telephone plus launched the website www.set.or.th/tsd to provide information via the Internet.
With SETTRADE.COM, it was able to offer the first IPO subscription system via the Internet aimed to facilitate the needs of the investors and underwriters. Total 23,977 persons registered early for online IPO. SETTRADE also provides a mobile service via its SETTRADE Mobile Alert. All services are aimed to better serve investors at a low cost and with greater convenience.
In regards to securities trading via the Internet, presently there are seven companies utilizing the services of SETTRADE.COM, plus another seven companies indicating their interests, thus totaling 14 potential Internet securities trading services provider. Currently there are 1,539 customers who already have the Internet trading accounts. Total trading turnover, under SETTRDAE.COM service, stood at 1,663 million baht.
Market Surveillance and Securities Companies Supervision
In 2001, the SET found 58 possible cases of irregular or unfair trading that might have involved price manipulation and insider trading. As a result, the SET has examined the cases and given a primary determination that they were likely to infringe the Securities and Exchange Act B.E. 2535, before passing them on to the SEC. 12 cases have already been adjudicated by the SEC, while 12 cases are still under examination.
To achieve a timely and rapid market trading surveillance program, and to prevent severe damage to the overall industry, through the auspices of the SEC, the SET has issued measures to deal with irregular trading, B.E. 2544, which has been effective since the 30th August 2001.
"In 2001, the SET found 24 cases of infringements to the SET regulations and determined to punish the securities companies and their officers concerned. 55 individuals were punished, while two securities were fined, and 19 companies were warned. In the case of Marketing and Licensed officers, 18 persons were warned by written document, one was put on probation, nine were fined between 5,000-250,000 baht, three were suspended from a period from one month to one year, and three also had their licenses revoked. Major offenses included issuing inappropriate trading orders i.e. sending and canceling orders with the intention to deceive, sending orders in pairs or matching orders of customers or connected groups, and closing price manipulation. Moreover, cases of infringement to acceptable practices were found, such as fraudulent practices in regard to customers' assets and accounts, making investment decisions on behalf of the customer, and allowing others to use their Trader ID number, etc," Mr. Kittiratt concluded.
