Scandals and slumping market: A tough year for the Thai stock exchange
Comprehensive reforms seen as essential to prevent erosion of trust
The Stock Exchange of Thailand (SET) has faced one of its most challenging years in recent memory in 2024. Compared to other markets in Asia and ASEAN, the SET has struggled, with performance indicators lagging behind its regional counterparts. The Thai market's outlook in 2024 has been marred by a series of high-profile financial scandals, leading to a substantial loss of investor confidence and market instability.
Overview of the market in 2024
Throughout the year, the SET has seen a downturn in performance. Market indices have underperformed, and trading volumes have decreased, reflecting a broader lack of investor confidence.
Factors such as global economic uncertainties, local political instability, and concerns about regulatory effectiveness have compounded the market's woes. Compared to the robust growth observed in other ASEAN markets, the SET's performance has been notably poor.
Scandals that shook the market
1. Dr. Boon Vanasin and Thonburi Healthcare Group
Date: November 2024
The case: Dr. Boon Vanasin, chairman of Thonburi Healthcare Group (THG) and co-founder of Thonburi Hospital, was accused of fraud and money laundering and he was later charged on December 14. He and his associates allegedly misled investors into pouring funds into non-existent medical businesses, promising high returns and issuing post-dated cheques that later bounced. The financial damage from this fraud is estimated at around 7.5 billion baht.
Impact: The scandal severely damaged investor trust in the healthcare sector and led to massive volatility in THG shares. The market reacted with caution, leading to broader scepticism about other healthcare-related stocks.
2. The Energy Absolute (EA) Scandal
Date: The Securities and Exchange Commission (SEC) of Thailand filed a criminal complaint against Energy Absolute (EA) directors and executives on July 12, 2024. However, the scandal began in 2016.
The case: CEO Somphote Ahunai and his deputy Amorn Sapthaweekul of Energy Absolute (EA), a leading renewable energy company, faced fraud charges. The allegations involved procurement fraud related to solar power equipment and software for projects in Nakhon Sawan and Lampang provinces between 2013 and 2015. EA's share price plummeted by nearly 95%, and the company found itself 81 billion baht in debt.
Impact: The scandal led to a severe erosion of confidence in the renewable energy sector. EA's share price volatility contributed to overall market instability, and the case highlighted significant oversight gaps in corporate governance within the industry.
3. The Stark Corporation Debacle
Date: The Stark case unfolded in multiple stages, starting in July 2023 and continuing through September 2024:
- July 6–7, 2023: The Department of Special Investigation (DSI) issued summons to key suspects to face charges.
- June 20, 2023: The DSI accepted it as a special case.
- September 18, 2024: The SEC charged five former Stark executives with publishing false information about the company's financial status.
The case: Stark Corporation faced allegations of accounting fraud and financial mismanagement. The scandal involved irregular transactions amounting to at least 15.6 billion baht. The company's stock was suspended for three months, and upon resumption, the share price dropped by 92%. The company defaulted on some of its 39 billion baht in liabilities, leading to further financial fallout.
Impact: The Stark Corporation scandal led to widespread distrust in the corporate sector. The significant financial losses and the subsequent market reactions demonstrated the need for stringent regulatory measures. The total estimated damage from this scandal is around 100 billion baht, affecting thousands of shareholders, bondholders, and creditors.
Current developments and market repercussions
As of now, investigations and legal proceedings are ongoing in all three cases. Dr. Boon is reportedly in China, and efforts are being made to extradite him. EA is grappling with debt restructuring and damage control, while Stark Corporation is under intense scrutiny with criminal investigations and class-action lawsuits.
The combined impact of these scandals has been profound. Investor confidence has been significantly eroded, leading to decreased market participation and a drop in stock prices. The SET Index has been down about 8% this year, reflecting the broader market instability.
Is the Thai market still attractive?
As we conclude this tumultuous year, the question remains: Is the Thai stock market still attractive to Thai and foreign investors? The repeated financial scandals have exposed serious regulatory gaps and highlighted the vulnerability of small investors. Despite the efforts of Thai authorities to encourage investment and save wealth through the stock market, the response to these scandals has been perceived as inadequate.
The current environment calls for more robust laws and stricter punishments to prevent future frauds and better protect small investors. The need for comprehensive regulatory reforms has never been more urgent if Thailand aims to restore trust and stability in its financial markets.
Only time will tell whether these changes will be implemented and whether the Thai stock market can reclaim its position as a reliable and attractive investment destination.
