Government Unveils Strategies To Revitalize Faltering SET Index

The Finance Ministry and stock market regulators announced new measures on Monday to boost the sluggish Stock Exchange of Thailand (SET) index. However, they downplayed analysts’ requests to reintroduce the tax-incentive long-term equity funds (LTFs).

Pornanong Budsaratragoon, the secretary-general of the Securities and Exchange Commission (SEC), stated that stock market regulators would propose to the cabinet an alteration in the investment conditions of Thai ESG (TESG) funds to bolster the stock market.

At a joint press conference with Finance Minister Pichai Chunhavajira, she proposed that the tax deduction limit be increased from 100,000 baht to 300,000 baht and the mandatory holding period be reduced from eight years to five years.

“We have discussed this with experts from the stock market, who said that reducing the holding period to only five years and raising the tax deduction cap to up to 300,000 baht will make the TESG funds sufficiently attractive for their investments,” said Ms. Pornanong.

She added, “The SEC aims to see more savings, which eventually leads to financial wellbeing, the main goal of the capital markets.”

Mr. Pichai noted that this proposal would be presented to the cabinet within two weeks. He expressed determination to implement the new measures swiftly, although they might not be ready for next week’s cabinet meeting.

Stock exchanges in Japan, South Korea, China, and Singapore have initiated reforms aimed at encouraging long-term investments. The secretary-general highlighted that similar mechanisms already exist in the Thai stock market.

The announcement came as the SET was trading at its lowest point in four years, with the index dropping below the 1,300-point mark last week due to political uncertainties, particularly a legal case involving Prime Minister Srettha Thavisin, which has shaken investor confidence.

According to Pi Securities, investors have sold over 100 billion baht worth of Thai shares to date this year, a decrease from the 192 billion baht in net sales recorded in 2023.

Despite a modest recovery in the SET index, which rose by 0.79% to close at 1,316 points on Monday, foreign investors continued to sell, offloading approximately 1.09 billion baht worth of shares.

Starting July 1, Ms. Pornanong stated that additional regulatory changes, including amendments to short selling and program trading rules, would take effect to enhance market supervision and boost investor confidence.

The upcoming changes will adjust the criteria for securities eligible for short selling, the pricing mechanism for short selling transactions, the registration of high-frequency trading (HFT) investors, and the disclosure of information on investors engaged in inappropriate trading activities.

Market analysts gave a lukewarm response to the measures announced, expressing disappointment over the non-revival of the LTFs.

Rakpong Chaisuparakul, senior vice president at KGI Securities (Thailand), remarked that there should be some reinvestment in underperforming stocks in the SETESG index following the government’s tax incentive increase for Thai ESG funds.

“However, we view that this ESG fund strategy is slightly disappointing for the public compared to market expectations for a return of the Thai LTF funds,” he said.

SET President Pakorn Peetathawatchai commented that while earnings per share have started to improve, the SET index remains sluggish. Stocks in IT, healthcare, and tourism have shown signs of recovery, whereas major stocks in energy and banking sectors lag behind.

“The price-to-earning ratio is lower than the five-year average. Now, the timing is right for investors to consider coming back to the SET,” he stated.