THAILAND: An Introduction to Capital Markets

Regulatory Initiatives to Enhance Trust and Drive Value in the Thai Capital Market

Thailand’s capital market faces significant challenges throughout 2024 due to a sluggish economy and a decline in trust and confidence. The Stock Exchange of Thailand (SET) has endured two consecutive years of negative returns, declining 15.15% in 2023 and a further 1.1% in 2024. Average daily trading value has also steadily decreased – falling by 18.2% in 2022, 30.5% in 2023, and another 12.7% in 2024 – ranking among the markets with the worst year-to-date returns for 2025.

Concerns surrounding the corporate governance of listed companies have further undermined investor confidence, exacerbating these negative trends. The SEC has responded by prioritising efficient law enforcement, resulting in a threefold increase in resolved cases in 2024 compared to 2023, with further improvements expected. This proactive approach aims to rebuild trust and confidence in the Thai capital market.

Strengthening market integrity

Recurring instances of corporate fraud and misconduct have exposed vulnerabilities in the internal controls of listed companies. The often protracted investigation process prior to indictment, coupled with questions surrounding the efficacy of professional gatekeepers (auditors, financial advisors, asset appraisers, and credit rating agencies), has exacerbated these issues. To address these systemic weaknesses, the SEC has proposed amendments to the Securities and Exchange Act and regulations governing IPOs and listed companies. These amendments aim to bolster market regulation and enforcement, ultimately restoring investors and public trust. Key proposed amendments include:

• Enhanced enforcement – the proposed amendments grant SEC officers broader powers, enabling them to conduct joint investigations with police or the Department of Special Investigation (DSI) in specified criminal offences. This collaborative approach seeks to enhance law enforcement effectiveness. The SEC board will be authorised to designate offenxes for joint investigation if the activities at issue are deemed to severely impact market confidence or the broader economic system. This co-operative framework is expected to expedite case proceedings and improve co-ordination with law enforcement agencies, leading to more effective enforcement and increased market confidence.
• Strengthened gatekeeper oversight – the amendments seek to enhance the role of gatekeepers in safeguarding the public interest. Gatekeepers will be required to immediately report suspicious activities to the SEC, including materially inaccurate or incomplete disclosures and violations of SEC rules by issuers or those responsible for disclosures, particularly when such actions could potentially harm investors or the public. The SEC also proposes expanding its enforcement powers to impose financial penalties on gatekeepers, supplementing its existing authority to suspend or revoke their licences.

Furthermore, the SEC intends to enhance the function of internal auditors by amending relevant regulations to ensure that securities issuers must appoint qualified internal auditors who satisfy SEC-prescribed qualifications and comply with SEC guidelines.

Driving sustainability in the Thai capital market

The SEC is continuing to foster sustainable value creation for listed companies and those seeking access to public markets, aiming to reflect the robust growth of Thailand’s sustainable finance market. As of January 2025, there were THB902 billion sustainability-themed bond issuances (by 39 issuers) and THB52 billion sustainability-themed mutual funds (managed by 17 firms). In addition, 26 Thai companies have impressively earned inclusion in the Dow Jones Sustainability Emerging Markets Index and 13 Thai companies have been recognised in Dow Jones Sustainability World Index.

With the aim of enhancing sustainability reporting, the SEC has proposed revisions to disclosure requirements for Form 56-1 One Report (annual report) and Form 69-1 (prospectus), aligning them with global standards established by the International Sustainability Standards Board (ISSB). The goal is to bolster the competitiveness and adaptability of Thai listed companies while meeting the evolving information needs of investors.

The ISSB standards require the disclosure of material information on climate and sustainability-related risks and opportunities across the company’s value chain that could affect its cash flow and capital in the short, medium and long term. The core contents include strategy, governance, risk management, and metrics and targets, compelling companies to assess climate and sustainability-related risks and their adaptability.

2025 outlook and priorities for the Thai capital market

Thailand’s economic outlook for 2025 remains susceptible to global trade tensions. Renewed trade frictions, particularly among major economies, pose a significant risk to the country’s export-driven growth. However, a projected recovery in domestic consumption – supported by government stimulus measures – offers some resilience. Continued infrastructure investment, potential interest rate cuts, and anticipated profit growth among listed companies contribute to a more optimistic outlook for the Thai stock market.

New listing rules, effective 1 January 2025, will impose stricter requirements for companies seeking to go public, as the rules demand higher levels of free-float, profitability, and shareholders’ equity. These more stringent criteria, combined with a projected economic slowdown, may present challenges for new IPOs in 2025.

A key priority is leveraging the capital market to promote sustainability, carbon neutrality, and net-zero targets. This focus aligns with shifting global trade dynamics – notably, the EU’s increasing emphasis on environmental considerations and its implementation of the Carbon Border Adjustment Mechanism (CBAM) in January 2026. The CBAM will require Thai exporters to declare product-related greenhouse gas emissions for carbon tax calculations before entering the EU market, further underscoring the critical importance of advancing sustainability initiatives.

In 2024, the OECD Council approved Thailand’s plan to join the OECD. Currently in Stage 2 of the membership process, Thailand aims to meet the goals of the Accession Roadmap and become a full OECD member within five years. Thai government agencies are working with the OECD to develop an initial memorandum outlining the necessary policy and regulatory adjustments. These efforts will drive reforms in areas such as investment liberalisation, tax, education, labour, and ESG practices – thereby enhancing investor confidence, creating a more robust legal and business framework, strengthening governance, and opening new opportunities for trade, investment, and international co-operation. Ultimately, this will contribute to a more sustainable and prosperous future for the Thai economy and capital markets.