The Securities and Exchange Commission (SEC) is seeking the Bank of Thailand's approval to at least double the limit of securities investment abroad from the present US$50 billion.
The move comes as demand is ramping up at a fast clip after local investors poured more money into foreign bourses and shunned the sagging local stock market pressured by the political strife.
The securities watchdog has also requested the central bank grant foreign exchange licences to securities companies to beef up their competitiveness.
Charuphan Intararoong, executive director for intermediary supervision and development, said the securities watchdog has asked the central bank to approve raising the ceiling for international investment by mutual and private funds and brokers to cope with investors' growing demand for ventures abroad, as the domestic market faces high volatility weighed by the months-long political uncertainty and economic slowdown.
Local investors have become more savvy about global investment and are allocating a higher portion of their portfolios to foreign markets on expectations of higher returns and diversifying their risks. Most international portfolio investment has been done through mutual funds, followed by securities firms, while short-term bonds and equities are the most common investment instruments.
As demand for investment abroad has increased rapidly over the past two years in line with the global economic recovery, the combined amount for foreign portfolio investment through companies regulated by the securities watchdog has reached nearly $50 billion.
An SEC report said as of February, $32.9 billion was requested for global investment. Some $25 billion or almost 76% of the requested amount has been invested, while 63% of the invested amount had been put into five markets — Hong Kong, Brazil, Turkey, Macao and Malta — with deposits and promissory notes being the most popular financial instruments at 44.5%, other debt instruments at 22.8% and unit trusts at 14%.
"We have to prepare lifting the global investment amount after seeing demand increasing since last year and expect the new ceiling will be approved by the second half of this year as investors take this opportunity to reap higher returns and manage risks," Ms Charuphan said.
She said the SEC has also requested the Bank of Thailand issue foreign exchange licences to securities companies to extend their business scope and sharpen their global competitiveness.
The Stock Exchange of Thailand is installing a new trading platform to serve multiple currencies this month.
At present, local investors with global trading exposure need to do foreign exchange transactions with commercial banks as the operation is limited to them. Should the Bank of Thailand allow stockbrokers to provide a foreign exchange service, it will facilitate international investment by local investors.
With a foreign exchange licensing operation, the new business of securities companies must be regulated by the central bank and they need to raise their capital to serve this new business on top of a minimum 7% net capital rule as required by the SEC.
"The SEC expects raising the foreign investment amount will be approved this year before the foreign exchange licensing request, as the Bank of Thailand must carefully consider the impact and capital control,” said Ms Charuphan.