(Bloomberg) -- Thailand’s stock exchange will tighten curbs on short selling and high-frequency trading as it attempts to revive investor confidence in the world’s worst performing equity market.
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Short selling and high-frequency trading will be limited to stocks in the SET100 Index, Asadej Kongsiri, president of the Stock Exchange of Thailand, told a press briefing Wednesday. The course currently allows short selling of stocks in SET100 Index and other securities with some conditions, while there are currently no limits set on high-speed trades, according to Asadej.
The crackdown on trades popular with hedge funds and day-traders is the latest attempt by Thai regulators to restore confidence in a market that’s seen foreign investors pull about $10 billion in the past two years. The benchmark SET stock index has slid about 10% this year, making it the biggest loser among the world’s major indexes, as listed companies report poor earnings amid sluggish economic outlook. The gauge fell as much as 0.8% on Thursday.
“We hope that the stricter rules will lessen any excessive swings in the share prices,” Asadej said. “This will stabilize the market and revive investor confidence.”
The bourse will also adjust an uptick rule on short selling. The revision will see the uptick rule being applied to only stocks with prices falling below a specified threshold. It currently requires all short-selling transactions to be conducted at a price higher than the last bid.
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“Continuing to allow short selling on the SET100 which is typically 90% of total market value traded appears to be more to soothe the local retail investor sentiment than actually curb short selling” said Gancanapol van Compernolle, a managing partner at RVC Emerging Asia Fund in Bangkok. “I think that this is a non-event.”
The exchange last year ordered high-frequency traders to register before they can place orders in a bid to stabilize the market that was battered by concerns over the impact of illegal short selling, program trading and corporate scandals. Authorities have also fast-tracked probes into fraud allegations at companies including Energy Absolute Pcl and Stark Corp.
The bourse will hold public hearing before seeking the approval of the Securities and Exchange Commission and implementing the new rules. The tighter curbs are expected to be implemented in the second quarter, according to Asadej.