Asia Plus Securities (ASPS) is calling on the Finance Ministry to speed up the unveiling of a rejigged long-term equity fund (LTF) to revive the Thai stock market, which is struggling with shrinking investor confidence partly attributed to recent political uncertainties.
In ASPS's view, the Stock Exchange of Thailand (SET) needs more tax-deductible funds and the LTF is considered the most efficient option to support the market's recovery.
Finance Minister Pichai Chunhavajira has repeatedly said the government is considering reviving the LTF scheme, which expired in 2019, in an effort to bolster the SET. Other funds under consideration are the Thailand ESG (TESG) fund, which supports investments in environment, social and governance (ESG) efforts, as well as the Super Savings Fund (SSF).
The Federation of Thai Capital Market Organizations and the Association of Investment Management Companies have discussed measures and scheduled a meeting with the Finance Ministry to propose the reintroduction of the LTF.
"The ministry may reintroduce one of these three funds. We expect the LTF to be reintroduced because it will boost stock trading value the most," ASPS said in a research note.
Through an LTF, which invests in a minimum of 65% Thai stocks, investors can deduct income tax of up to 500,000 baht over an investment period of seven calendar years. The SSF, which invests in Thai and foreign securities, allows investors a tax deduction of up to 200,000 baht, or up to 500,000 baht when combined with other retirement funds. However, the holding period for an SSF is 10 years.
A TESG fund, which invests in Thai stocks and bonds with good ESG ratings, offers investors a tax deduction of up to 100,000 baht and has a holding period of eight years.
"The LTF increases liquidity and buying volume more efficiently than the TESG and SSF. The LTF can improve trading value by 5-6 billion baht a month, higher than the TESG and SSF, which can raise trading value by 1.1-1.2 billion baht per month," said the brokerage.
The ministry may introduce a new fund that invests in Thai stocks and offers a higher tax deduction ceiling and shorter holding period, aiming to mimic the LTF's trading value, noted ASPS.
