Repeated corruption in Thai stock market erodes trust as fraud cases shake investors

• Corporate executives and owners involved in corruption for personal gain are the main cause of eroding investor confidence in the Thai stock market.
• Repeated corruption cases in stocks like STARK, MORE, IFEC, and JKN have caused significant damage and shaken investor faith, especially among retail investors.
• The delay in investigation and action by regulatory agencies is seen as a critical loophole that allows wrongdoers to evade justice, causing widespread damage.
• The crisis of trust resulting from the regulatory failure has led to a tarnished image of the Thai stock market, and the real trading value has dropped to levels similar to those of 20 years ago.
• The recommended solution to regain trust is to punish the wrongdoers swiftly and decisively, and improve the efficiency of the auditing mechanism.

“Business founders” or when stepping into the role of a “Thai listed company” (listed company), they often become the “major shareholders” and typically hold the position of CEO to control the organisation. The role and responsibility of the CEO are to “manage the organisation” and “drive the business” to grow. However, when the CEO or the owner uses their role and responsibilities for “personal” rather than “organisational” gain, it inevitably leads to “lack of transparency” and “corruption.”

This reflects the image of the Thai capital market over the years, having to face a crisis of trust from investors due to various cases where corporate executives caused repeated damage through lack of transparency, leading to fraud and corruption cases. If we look at the cases that shook the stock market, ranging from IFEC (which was delisted), EARTH, MORE, STARK, JKN, and THG, the problems were a result of "lack of transparency" that severely affected both stocks and bonds.

As a result of the damage, retail investors started losing trust and confidence in the Thai stock market. Meanwhile, the relevant authorities in the capital market appear to have been “slow” in taking action, allowing the problem to escalate and cause huge damage. This has had a widening effect, negatively impacting shareholders and the image of the Thai stock market.

“Wijit Arayapisit,” an investment strategist from Liberator Securities said that the news of lack of transparency in the Thai stock market over the past several years has seriously shaken the confidence of investors, particularly retail investors. He acknowledged that the corruption and irregularities reported in the media are a key factor damaging the image and credibility of the Thai capital market.

STARK case: once trusted, now labelled a fraud

Particularly in the case of STARK, which was once a highly trusted stock with backing from multiple domestic and international institutions, many investors had confidence in the company's fundamentals. However, it was eventually accused of fraud, with its results turning into a loss.

Following this, MORE saw an influx of retail investors speculating on its stocks, even though the company’s performance wasn’t impressive. The same issue also occurred with IFEC and EARTH, which created damage in both their stocks and bonds.

When such damage occurs, the regulatory authorities like the Securities and Exchange Commission (SEC) and Stock Exchange of Thailand (SET) acted only after significant delays. This allowed wrongdoers to possibly escape justice, creating widespread harm.

Investment advice: self-screening and scrutiny

For investment advice, it is recommended that investors should screen and verify stocks themselves. Don’t just rely on profit and loss statements because, in some cases, the numbers could be manipulated. This is especially true for companies operating internationally, which are difficult to verify. Additionally, investors should compare performance with industry trends; if a company’s profit is unusually high compared to its competitors, immediate questions should be raised.

“Suwat Sinsadok,” managing director of Globlex Securities, stated that the Thai stock market is facing a crisis of trust due to corruption and transparency issues. While there are regulatory authorities, the audit system remains slow, causing many investors to lose confidence in the market structure.

JKN case reawakens concerns in the stock market

Recently, the JKN case has brought the stock market back into focus. The management of JKN is suspected of potentially fleeing the country or being involved in prior corruption cases, similar to MORE, IFEC, and EARTH. These cases highlight the critical gaps in oversight and punishment systems, which are falling behind.

The major issue leading to the downturn of the Thai stock market is the lack of investor confidence in the market's regulatory framework and government agencies. Meanwhile, the real trading value has dropped to 13–14 billion baht per day, close to levels seen 20 years ago. Many companies are facing business issues and are unable to grow or sustain profits in the long term.

Speedy punishment and LTF fund proposal to restore confidence

“If there is swift and decisive punishment for just 2-3 key cases, it can help restore confidence in the market to some extent. Additionally, reintroducing the LTF mutual funds could direct more money into the stock market, boosting liquidity and providing tax benefits for investors.”

“Apichat Phubanjerdkul,” Senior Director of Strategic Analysis at TISCO Securities, commented that the JKN case highlights the core problem: using borrowed money to acquire businesses, but actual revenue did not meet expectations, signalling the structural risks in the business.

Although the SEC and SET have been slow, the regulatory system must ensure fairness for the accused, but there is a need to expedite enforcement mechanisms. For instance, empowering the SEC and consolidating major cases under a single authority could set clear deadlines for investigations, such as within 3 years. This would reduce the delays that retail investors face while waiting for the results.

“Rushed or hasty punishment may cause even greater damage,” he added. “Thus, it’s essential to give the accused a chance to explain themselves fully. However, the process should not take too long to avoid further delays.”