Pornanong Budsaratragoon, Secretary-General of the Securities and Exchange Commission (SEC), revealed that the Thai ESG X Fund will be available for public offering starting May 2, 2025.
The new fund will also facilitate the transfer (switching) of investment units from existing Long-Term Equity Funds (LTFs) starting May 13, 2025. The subscription period will last for two months, from May 2 to June 30, 2025, in accordance with the conditions set by the Revenue Department.
The SEC has already issued regulations to support the establishment and management of the Thai ESG X Fund. There are 37 Thai ESG X funds from 19 asset management companies (AMCs), currently under review for approvals, with the current total of 80 LTFs from approximately 20 AMCs and an investor base of around 400,000-500,000.
Anticipated fund inflows to the Thai ESG X Fund are divided into two segments:
- New investment funds, expected to be not less than the current TESG Fund, with an average inflow of around THB 10 billion per month.
- Funds switching from the existing LTFs, which collectively hold an approximate value of THB 150 billion. Should all units be switched, this would inject more than THB 150 billion into the capital market.
The SEC is confident that the Thai ESG X Fund will be a crucial mechanism in promoting sustainable business practices and supporting national sustainability goals. It also aims to incentivize the public for long-term investment through the Thai capital market.
The SEC has worked proactively to update relevant regulations, allowing AMCs to submit applications and receive approvals in line with the official schedule.
The collaboration between the Association of Investment Management Companies (AIMC), AMCs, and the Stock Exchange of Thailand (SET) is also underway to facilitate LTF unit holders in checking their LTF holdings since all LTF units across every AMC will be required to switch to the Thai ESG X Fund for investors to receive tax benefits.
Warotai Kosolpisitkul, International Economic Advisor at the Fiscal Policy Office, Ministry of Finance, added that the phased sell-off of LTF units in early 2025 has affected the Thai stock market. As a response, new tax measures have been proposed to stabilize the capital market, elevate capital-raising, and promote investments in sustainability-focused (ESG) equities.
The tax benefits are divided into two tracks for new and existing investments:
- Tax deductions for purchasing units in the Thai ESG X fund.
- Tax deductions for switching LTF units into Thai ESG X units.
These measures are expected to increase investment options, grow the number of investors prioritizing sustainability, boost the institutional investor base focused on sustainable businesses, and encourage listed companies to integrate long-term sustainability into operations.
However, the Ministry of Finance estimates the tax incentive for the Thai ESG X Fund will reduce state revenue by approximately THB 40-50 billion—THB 20 billion from new investments and another THB 20-30 billion from the LTF-Thai ESG X switch.
Asadej Kongsiri, President of the Stock Exchange of Thailand, said that the Thai ESG X Fund will likely support the Thai stock market via two main channels:
- Easing selling pressure from existing LTFs, valued at about THB 150-160 billion, and boosting the switch to the Thai ESG X Fund.
- Attracting new capital inflows to the market, with no limitation to only equities.
The SET is prepared to provide an online service for investors to view all their LTF holdings on the SET website, streamlining checks and facilitating quicker and easier decisions to switch to the Thai ESG X Fund for tax benefits, starting from May 2, 2025.
Furthermore, the SET also plans to work with the AIMC to expand lookup services for other tax-deductible funds, such as RMF, SSF, and Thai ESG, for greater investor convenience.
Theeranat Rujimethapass from the AIMC, representing Thai asset management companies, confirmed that 19 AMCs are ready to offer 37 Thai ESG X funds.
Investors can subscribe the funds from May 2, 2025 or request to switch all their LTF units from May 13, 2025; all switching or investment must be completed by June 2025. The fundraising target for the Thai ESG X Fund is aimed to be at least THB 20 billion.
The current state of the Thai equity market has already priced in significant risk, with the P/E ratio falling below -2 Standard Deviations (SD). A return to the previous P/E ratio is anticipated to yield double-digit returns. Meanwhile, long-term investing remains attractive, especially as ESG-focused companies are set to exhibit better performance compared to others.
The AIMC also reported that LTF’s cumulative selloff from January to March 2025 was around THB 33.8 billion, with net outflows of THB 18.9 billion in January, THB 9.1 billion in February, and THB 5.8 billion in March.
Yuanta Securities (Thailand) noted that the sharp LTF selloff in January 2025 abated as details on the Thai ESG X Fund became clearer. The analyst expects greater utilization of the new tax benefits compared to the previous TESG, following attractive valuations in Thai equities while the Thai ESG X Fund is the only policy benefiting salaried workers.
The analyst stated that allocating more than 65% of the investment proportion to Thai stocks relative to NAV will help limit the downside risk for the Thai stock index during periods of global market volatility, which can be triggered by U.S. tax policies and the typical “Sell in May” phenomenon that often occurs in May.
However, the measures are expected to help support ESG-rated stocks to outperform the market. Recommended stocks include AMATA, BEM, BCPG, CPALL, GPSC, GULF, KBANK, KTB, PTTGC, SCC, and SJWD.
