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Finance Ministry to launch 500 billion baht fund to boost shares

Picture courtesy of Maxim Hopman, Unsplash

Stock analysts are backing the Finance Ministry’s initiative to establish a new fund aimed at boosting investment in Thai shares, predicting a surge in trading activity in the fourth quarter.

To revitalise the sluggish stock market, Finance Minister Pichai Chunhavajira announced that the ministry is exploring the creation of a new fund similar to the Vayupak Fund, a former state-managed investment fund focused on Thai shares with strong fundamentals.

Pichai revealed plans to set up two funds with a combined value of 500 billion baht (US$13.6 billion), with 150 billion baht (US$4 billion) earmarked for public investment.

The final details of this initiative are expected to be confirmed by the third quarter of this year, according to Pichai.

Simultaneously, the ministry intends to revise the conditions for Thai ESG (environmental, social, and governance) funds. The proposed changes include increasing tax incentives to a maximum of 300,000 baht (US$8,200) from the current 100,000 baht (US$2,700) and reducing the holding period from eight years to five years, said Veeravat Virochpoka, head of research at FSS International Investment Advisory Securities.

“The Vayupak-style fund could stimulate the demand side of the stock market starting from the fourth quarter this year.”

According to Veeravat, every 10 billion baht (US$272 million) invested in the fund could potentially increase the Stock Exchange of Thailand (SET) index by 20 to 30 points.

Asia Plus Securities (ASPS) highlighted that the revised Thai ESG fund could potentially attract 60 to 70 billion baht (US$1.6 billion to 2 billion) worth of investment to the SET annually, predominantly from institutional investors.

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“This year, institutional investors’ net purchases of Thai shares are very small at only 4.8 billion baht (US$ 130 million) year to date, as they are holding cash of almost 10%.”

ASPS’s research team believes that a revised Thai ESG fund should encourage institutional investors to allocate more funds to their portfolios, especially for mid-year window dressing, reported Bangkok Post.

“There is a chance Thai ESG funds could attract investments of 60 to 70 billion baht per year to the SET after the revision. Every 10 billion baht in investment usually supports the SET index moving up by 1 to 2%.

“The Thai ESG measures come at the right time because the SET index has a very interesting valuation. However, tax-deductible funds are usually active in the fourth quarter.

“An amendment of measures now may support the market at a time when it is weak.”

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