Tag Archives: ltf

LTF privileges get 3-year extension

The fears over an extension of the LTF seem to have finally abated as the Finance Ministry decided to extend the period for another 3 years, but with a little catch this time. In the past…

The lock-up period for investment in LTFs has been extended from the previous five calendar years to the date of purchase until a full five years at a minimum.

And as the article writes and as many of us have done…

“…some LTF holders in practice held units for slightly more than three full calendar years, buying the units as year-end approached and redeeming them early in the fifth year.”

 

Oh well there goes that nice little trade.

Source: Bangkok Post

LTF gets go-ahead with tweaks

The speculation on whether or not the LTF scheme would be extended had some traders nervous, now the latest news is that the Finance Ministry would extend it for another 10 years. I do like the LTF scheme as it has helped with liquidity in the market and does force people to save $ for once, but on the flipside, asset houses have become lazy because of the guaranteed income they’ll receive in new funds. Here are the key points with a link to the full article below:

  • LTF’s were originally going to finish in 2016
  • The holding period may extend from 5 to 10 years
  • LTF investment is fairly popular among taxpayers, with asset size rising by almost 30 times from 2004 to more than 200 billion baht today
  • Institutional investors’ turnover ratio on the Thai bourse has risen to 9-10% from 5-6% when LTFs were launched
  • Mr Kritsada said two options were being weighed — cutting the ceiling tax deduction of 500,000 baht for LTF investment or cutting the overall deduction to 800,000 baht a year

Source: Bangkok Post

LTF tax breaks to end in 2016

So the artificial floor in the market will be gone, fun times ahead in 2 years from now. Now Asset Management firms will have to focus on actually performing well, and the next thought that comes to mind is, what will the government do in terms of personal income taxes?

The Finance Ministry will not renew the tax privileges for long-term equity funds (LTFs) after they end in 2016….Of the combined outstanding value of LTFs of 200 billion baht, 40 billion can be sold each year, a negligible amount compared to the average daily trade value of the Stock Exchange of Thailand of 60 billion baht.

Source: Bangkok Post

LTF tax privileges face uncertain future

The LTF investment scheme begun in 2002 by Thaksin which has essentially helped to bring more local funds into the market in Thailand.

“LTFs are on the front burner when we talk with the Revenue Department. The association must make the department conform to the same view. Many people think such funds only benefit the rich, but that’s not true as more middle-income earners have also showed interest in putting money in these funds after they learn more about their privileges,” she said.

Source: Bangkok Post

The impact of this has been positive because increased the increased investment flow has led 1) increased liquidity within the market 2) The huge valuation discounts that were incredibly evident pre ’07 have now disappeared which in turn allows companies to raise capital at fairer valuations 3) The local Investment industry in Thailand has grown remarkably, with assets under managment at all the major firms hitting new highs year after year.

But Local institutions are still a small part of the overall value traded on the SET, retail investors still represent the largest @ 50-60%, followed by foreign investors @ 15-25% and the remainder with local institutions and prop funds. So there is still a long way to go for the professional investment industry to grow here in Thailand, to remove this LTF tax privelege will result in AUM’s no longer receiving additional funds for which to invest and thereby halting any growth in the capital markets in Thailand.

Let’s just hope they aren’t so silly.

LTF tax break is likely to be extended

This is good news for continued fund flow into the local equity market here. LTF’s essentially were created as a methodology for individuals to 1.) minimise their tax bill, 2.) improve domestic long term shareholding in the SET.

Whats startling is still the simple fact that despite retail investors accounting for 60% of daily trading in the SET, the number of mutual fund accounts are still only at 2 million. Perhaps that helps to explain why Thailand has a horrible Gini coefficient…but that’s a rant for another time.

“The incentive for LTF investment will be revised to sustain the demand. Assets under management of LTFs are around 150 billion baht now,” said Mr Sathapana.

According to AIMC, total assets under management of AIMC’s members as of last Friday totalled 2.36 trillion baht.

Of the total, 61.7% or 1.46 trillion baht was fixed-income funds, 478 billion baht was equity funds (20.2%), 70.4 billion baht was mixed funds (2.98%) and 129 billion baht was property funds (5.45%).

Source: Bangkok Post