Thailand plans to tighten listing rules as a major accounting scandal, debt defaults and unexplained share gyrations rattle investors, putting the nation’s key stock index on course for its lowest close in more than two years.

The Stock Exchange of Thailand’s board on Wednesday approved a “sweeping revamp of listing regulations” that includes increasing the ratio of free-float and setting a higher threshold for profitability and shareholder’s equity. The new rules, once endorsed by the market regulator, will also apply to the Market for Alternative Investment board for smaller companies, the bourse said in a statement.

Thai stocks are the worst performers in Asia this year with foreign investors offloading a net $3.1 billion so far this year, the most among Asia’s emerging markets. Excessive volatility in some shares, including the nation’s most-valuable company, and an accounting scandal that’s led to a bond default at a listed electric cables maker are among the latest events to shake investor confidence in the $535 billion market.

“There is an urgency for all related agencies to take serious action to prevent any future incidents,” said Niwes Hemvachiravarakorn, a high-net worth individual investor and founder of Thai Value Investor Club. “Any further delay would affect investors’ confidence in the Thai market.”

About $9 billion of Delta Electronics (Thailand) Pcl’s market value was shaved off in a single day after the exchange placed curbs on trading this week when the company failed to explain the reasons for a sharp rally in prior sessions. The gyrations prompted warnings from analysts including Koraphat Vorachet at of Krungsri Securities Co. that the stock may be axed from some indices, triggering more volatility. Delta attributed its share-price fluctuations to “market conditions and external factors beyond our control.”

Investors have also been hit by a slump in Stark Corp. that’s seen its shares plummet to near-zero — slashing its value to about $11 million from this year’s peak of $1.2 billion. The company has defaulted on its bonds and a special audit revealed accounting irregularities in the past two years that’s left it with liabilities exceeding assets. All Inspire Development Pcl and Cho Thavee Pcl are among other local companies that have recently defaulted on bond payments.

The market turmoil prompted Finance Minister Arkhom Termpittayapaisith to urge the Securities and Exchange Commission to take steps to protect the interests of investors and rebuild confidence. Srettha Thavisin, a prime ministerial candidate of the Pheu Thai Party that’s part of a coalition staking to form the next government following Thailand’s May 14 election, said on Twitter that the troubles in the market were the results of regulatory loopholes.

Harsher Punishments

Srettha, a former business tycoon, called for harsher punishment for capital market offenders, including jail terms to rid the impression “that Thai stock market is a market that can be easily manipulated. Otherwise, these events will repeat over and over again until both Thai and foreign investors lose confidence in the Thai market.”

Thailand’s benchmark SET Index fell as much as 0.7% to 1,510.80 on Thursday, heading for its lowest close since March 2021.

The exchange aims to curb stock volatility and the future collapse of companies by raising the free-float criteria and paid-up capital norms. The measures, that could be implemented by the end of this year, will also boost liquidity in the secondary market and protect investors, the bourse said.

The regulatory overhaul is part of SET’s three-year strategic plan to widen the scope for fund-raising for companies and address the current pain points, President Pakorn Peetathawatchai said.

Highlights of other regulatory changes:

• Same minimum paid-up capital requirement for companies listing on SET and MAI
• Raise requirements on free-float and the public offering allocation ratio of small-sized companies
• Deteriorating financial position or operating performance such as low operating income or continued losses, default on payment of debts or other instruments and auditor disclaimers and targets of backdoor listing may trigger warnings to investors
• SET to delist companies that are unable to rectify all causes of delisting and resume trading within the specified period
• SET to seek public feedback in the third quarter before implementing the new rules with SEC approval