Fostering sustainable financing to help the country move towards net-zero carbon emissions and expanding digital assets are among the major roles the Thai capital market is to focus on over the next five years to enhance its competitiveness and support overall economic growth, a recent study revealed.
Thailand remains in the early stages of building a capital market to enable fully-fledged green finance. To continue its journey, several challenges remain, notably the limited availability of institutional funds earmarked for green investing for the time being, says a joint paper by the Thailand Capital Market Development Fund and McKinsey.
"To achieve Thailand's net-zero ambition, there is an opportunity for capital markets to push the frontiers of green finance. This will require financing tailored to both the decarbonisation of existing technologies and the development of new green solutions," said the study.
There is potential to establish green technology funds to apply to zero carbon innovation. Thailand also needs a carbon trading mechanism. This would enable companies to fulfil their emissions obligations through market mechanisms such as carbon credit exchange, it added.
In the area of digital assets, Thailand has already proven itself to be an early adopter of digital assets in the region. The granting of such licences, awarded since 2019, has led to the creation of digital platforms in the country.
The central bank, meanwhile, plans to launch a retail Central Bank Digital Currency. The pilot, planned for the final quarter of this year, will test deposits, withdrawals and transfers.
"Thai capital markets can consider opening up digital assets and exchanges, at the right time with the right oversight. This will require the exploration of further use cases of digital assets, namely new tokenised asset classes, wallet, rewards, gifts, crypto, NFT and real estate tokens, balancing risk with market readiness," it said.
Learning from global players, like Singapore, Thailand can explore potential collaboration between public and private players, such as exchanges and banks, to launch market infrastructures based on digital ledger technology.
Efforts can also be made to establish clear, up-to-date related regulations to enhance investor protection and nurture innovation, the report added.
Besides, with more than 32% of the population set to be 60 or older by 2040, pension provision presents a significant challenge. However, there is an opportunity for progress through the creation of a new national pension fund which the capital markets can play a pivotal role in supporting its development.
As well, the capital markets can expand its role in nurturing small and medium sized enterprises which are the backbone of the economy. Potential initiatives would include enhancing capital and financial support, for example, through investing in talent and advisory, and creating new platforms and deal-making venues to funnel capital to promising ideas, according to the report.