The forthcoming implementation of the Uptick Rule is expected to provide a notable uplift to Thailand’s SET Index, as the measure is poised to curb short selling activity in the stock market, identified as a factor impeding the country’s equity market.
The Uptick Rule serves as a mechanism to deter sellers from exacerbating the downward momentum of a securities price that is already experiencing a significant decline. When initiating a short-sale order at a price exceeding the current bid, a short seller guarantees that the order is executed on an uptick.
Maybank Securities (Thailand) (MST) expressed confidence in a positive reaction from the SET Index, highlighting that during the previous implementation of the rule by regulators from March 13 to September 2020, the SET Index surged by up to 27% within three months post-implementation.
The brokerage firm underscored that the substantial market upswing could be attributed to the reduction in short selling, which dropped from an average of 6% to just 1%, while short selling value for the current year had risen to 12%.
MST anticipates that the introduction of the Uptick Rule will prompt traders to hasten their short covering activities, particularly for stocks that have recently witnessed sharp declines in prices. Among the stocks deemed to have significant potential for short covering, MST picked ERW, CPALL, and TTB as top recommendations.
