The Finance Ministry is expected to study resuscitating the long-term equity fund (LTF) scheme as proposed by former premier Thaksin Shinawatra in a move to improve the sluggish stock market, say analysts.
Following remarks by Thaksin that LTFs, which expired in 2019, are more effective at stimulating market activity than the existing Thai ESG funds, the ministry should explore ways to attract new funds to the local bourse, including reinstating LTFs, said Yuanta Securities.
"To maintain liquidity in the capital market, the ministry is reviewing the reintroduction of LTFs, as Thai ESG funds failed to channel funds into equities, with most going to bonds instead," said the brokerage.
Thaksin also highlighted the lack of growth in the Thai stock market due to eroded trust and confidence.
Moving forward, the government and the Securities and Exchange Commission (SEC) must play a part in enhancing corporate governance, according to the former premier.
Thaksin suggested issuing an emergency decree to empower the SEC to punish offenders swiftly, as well as regulating high-frequency trading to prevent market volatility and protect local investors.
The government should also attract new businesses, such as entertainment complex investment, to list on the stock market, as well as increase supply of new S-curve stocks through Board of Investment incentives, according to Thaksin.
Yuanta views Thaksin's vision as positive, noting "while immediate implementation of some proposals may be challenging, it demonstrates an understanding of the capital market's issues related to governance and confidence".
Stimulus measures under consideration include reviving LTFs to retain capital in the stock market and encouraging share buybacks by companies with low price-to-book value.
Tax reforms are also being studied, with plans to reduce corporate and personal taxes while compensating with adjustments to value-added tax and the introduction of a negative income tax to support low-income earners, the brokerage noted.
Kasem Prunratanamala, head of research at CGS International Securities (Thailand), said the reintroduction of LTFs would help to offset potential outflows from the Stock Exchange of Thailand (SET).
"However, the government has to weigh potential lost tax revenues, which we estimate at 8-10 billion baht per year, as a result of the resumption of LTFs against a potential revival of the SET," he said.
Investments in LTFs of up to 500,000 baht enjoyed tax deductions and needed to be held for at least seven calendar years. This means people who invested in LTFs in 2019 can redeem their holdings in January 2025.
CGS estimates roughly 43 billion baht in LTFs were redeemed in 2024, while outstanding LTFs tallied 220 billion at the end of 2024.
Without new LTF inflows, the brokerage estimates LTF redemption of 45 billion baht this year and 40 billion in 2026.