A proposed ESG fund could attract inflows to 114 stocks listed on the Stock Exchange of Thailand's ESG index, with an estimated value of up to 70 billion baht this year, according to analysts.
A long-term savings fund focused on investing in domestic environmental, social and governance (ESG) stocks and bonds, which is expected to be established this year, could attract 20-70 billion baht worth of investments to the Thai stock market, said Krungsri Capital Securities (KCS).
If the fund has investment conditions similar to the tax perks offered for the long-term equity fund (LTF), it would be positive news for the Thai stock exchange, said KCS.
In the final five years before LTFs expired in 2019, each fund had an average size of 65.9 billion baht, said the brokerage.
"The ESG fund will be designated to invest in ESG stocks on the Stock Exchange of Thailand [SET]. This differs from the Super Savings Fund [SSF], which is not required to invest only in stocks, and the tax deduction amount for SSF is combined with other kinds of investment such as life insurance and provident funds," said KCS.
"The maximum deduction of 500,000 baht was for LTFs investments solely."
The SET ESG index this year comprises 34 companies with an AAA rating (total score of 90-100), 70 companies with an AA rating (score of 80-89), 64 companies with an A rating (score of 65-79), and 25 companies with a BBB rating (score of 50-64).
The new fund would make the SET's ESG index more appealing to investors, particularly as stock prices are cheap this year, KCS noted.
Asia Plus Securities (ASPS) said the SET ESG index outperformed the SET index for all time frames, amid either bullish or bearish markets.
All 114 SET ESG stocks should become more favourable among both active and passive funds, said the brokerage.
"The SET index fell as some stocks had a short sales value higher than under the uptick rule," said ASPS.
"If a new ESG fund with tax perks is issued, the SET index should increase trading value by 20-70 billion baht for the rest of this year, probably outperforming global markets."
KCS said ESG stocks likely to be targeted by the ESG fund include CP All, Gulf Energy Development, Central Retail Corporation, Global Power Synergy, PTT Global Chemical, Indorama Ventures, SCG Packaging, PTT Oil and Retail Business, Carabao Group, and Home Product Center.