Jailing 'negative' analysts - Amazing

[Guest]

MARKET - RESTORING CONFIDENCE IN STOCKS AND BANKS

 

SEC threatens to take action against 'negative' analysts

 

Fines as well as jail sentences possible

 

NUNTAWUN POLKUAMDEE AND WICHIT CHANTANUSORNSIRI

 

The Securities and Exchange Commission has threatened to press charges against any securities analysts found to be spreading ''negative'' rumours or reports.

 

SEC secretary-general Thirachai Phuvanat-naranubala said that under the SEC Act, such offences could be punished with fines of at least 500,000 baht and jail sentences of up to two years.

 

Finance Minister Somkid Jatusripitak issued a similar stern warning, saying that any analysts found to be spreading reports without grounds would have their licences revoked and could face criminal charges.

 

Authorities came out against local analysts as Thai shares dropped another 1.1% yesterday, their eighth straight losing session. Since the beginning of the year, the Stock Exchange of Thailand has fallen nearly 23%, a sharp change from the 116% gain posted last year.

 

Analysts say poor market sentiment has been led by selling of local banks, particularly market giant Krung Thai Bank. Reports that the central bank was considering divesting its shares in the bank and questions about its financial stability have pushed the bank's share price to a one-year low.

 

Dr Somkid said unfounded reports and rumours were undermining the stock exchange and had to be addressed.

 

Securities regulators were directed to audit tapes of local analysts when consulting with clients to see if the information being passed was accurate.

 

''If [analysts] are speaking without any factual basis, it's causing economic instability and is wrong,'' Dr Somkid said.

 

He criticised those who adopted views that were unjustified and unsupported by facts.

 

''Some say that Thaksinomics will cause the economy to crash. What exactly are they using as the basis for their analysis? It's like saying a healthy person must become sick for certain.''

 

He said exports and tourism remained strong, while foreign investment for the year to date had exceeded targets of 400 billion baht.

 

Mr Thirachai said rumours spread in trading rooms had undermined the investment environment. He singled out Bualuang Securities for spreading a research report that the SET was considering suspending shares of Siam City Bank, a report that proved to be false.

 

''Too much analysis is based on sentiment rather than in-depth fundamental analysis,'' he said.

 

''Three factors are currently affecting investor sentiment worldwide _ oil prices, interest rates and the slowdown of the Chinese economy. But the impact on the Thai economy is relatively slight, yet other factors have contributed to a panic. And both local analysts and marketing officers have contributed to this.''

 

Mr Thirachai said investors should focus on fundamental factors such as the core profitability of local companies, which was improving steadily over the past several quarters.

 

Starting Oct 1, the SEC will maintain a register of local analysts, including a preliminary outline of responsibilities of securities executives for their research reports, with brokers held accountable for their house positions on local stocks.

 

Mr Thirachai said the SEC, the SET and the Securities Analysts' Association would co-ordinate to help improve the quality of research and establish clear codes of conduct.

 

Kongkiat Opaswongkarn, chief executive officer at Asia Plus Securities and chairman of the Securities Analysts' Association, said analysts should not focus excessively on sentiment factors, particularly in a bear market when investment and profit opportunities actually increased.

 

''Last year, the Thai market increased, and analysts uniformly agreed that further gains were possible,'' he said.

 

''Yet since the beginning of the year, the market has declined, and analysts have turned to saying further declines were likely. But the Thai market is much different than four years ago, with leveraging down and profitability up.''

 

**********************

 

If you have any familiarity with markets, this is an amazing report. It speaks volumes about how certain vested interests view the stockmarket.

 

In developed countries analysts can get in trouble if they fail to disclose conflicts of interest. That makes sense. But here, the Gov't is threatening to fine and jail analysts if they provide negative reports - which the Gov't, in its infinite wisdom of the true value of companies - does not agree. And this from a government where the ruling members have seen their fortunes double because of gains on the stock market, and now threatened as the SET stumbles.

 

Who said Thailand was not transparent?

[khunsanuk]

Hi,

 

" ''If [analysts] are speaking without any factual basis, it's causing economic instability and is wrong,'' "

 

I guess those voicing positive rumours are as much at fault then as those voicing negative ones, right?

 

Anyway, I think this is a strong reason in favor of not investing in the Thai stock market.

 

SanuK!

[..]

Gadfly1 said:Dr Somkid said unfounded reports and rumours were undermining the stock exchange and had to be addressed.

 

LOL! A friend who is one of the wealthiest guys I know always tells me to "buy on rumour and sell on fact." Seems to be pretty sound advise.

 

But a very sad commentary on LoS in general as we go full speed reverse!

 

Cheers,

SD

[Lord Toad]

The frightening thing is they actually think this will help!!

The first question I would ask is what are they frightened of?

I think a sell Thai stocks recommendation is likely

[Guest]

I guess those voicing positive rumours are as much at fault then as those voicing negative ones, right?

You are right; the report doesn't say anything about false positive reports. I guess those are OK.

[Guest]

The first question I would ask is what are they frightened of?

I suspect that precisely that same thought will go through the minds of everyone in the financial community - both inside and outside Thailand - when they hear about these new government measures.

[bibblies]

It's funny how the Thais never seem to realise that such action makes them a laughing stock to outside eyes, isn't it? They just seem to have no clue...

[MrX]

what is the current price of "laughing" stock, might I ask?

[bibblies]

::

[Guest]

What are they going to do about foreign-based analysts? Seek our extradition or ban us from entering the country?

 

This is really amazing. So amazing I originally thought it had to be a joke, but then I checked the article on-line. I wonder if anyone there realizes how foreign-based analysts are going to react to this? Thailand already has a dubious reputation for in terms of trying to suppress negative financial information and fabricate positive financial information. I will make sure to circulate the Bangkok Post article in the financial community here; we'll all certainly have something to talk about on Monday.