Talks between the Finance Ministry and the Federation of Thai Capital Market Organizations (Fetco) over renewing tax deductions for investment in long-term equity fund (LTFs) remain inconclusive, making it likely the rule will be reduced or scrapped.

Source: Bangkok Post

LTF’s and RMFs had dramatically changed the Asset Management industry structure in Thailand since inception. Today we have THB 2.34 bn in LTF’s and THB 150 bn in RMFs and Asset Management firms in Thailand have seen their AUM’s increase multiplefolds as a result of this – not necessarily as a result of their performance. The impact of this increased AUM has led to local institutions playing a slightly larger role in Thai Equity Market (in percentage terms they still only represent 10-15% of total daily value traded)  even to the point where I believe they create an articial floor for prices during market declines because of the excess liquidity that they have on hand.

What would the impact be to the market should LTF’s be dissolved? Given that LTF AUM is “only” THB 2.34 bn, the impact will be minimal, as there would only be zero new inflows into LTF’s while RMFs are still going to receive fund flows.

In a perfect world I do hope that this may force the Asset Management industry in Thailand to improve their performance, other than Aberdeen and at periods Krungsri AM or BBLAM, the majority of mutual funds have had rather underwhemling performances when benchmarked to the SET. Then again having experienced myself how local institutions work, the change would have to happen at the top level rather than with the Fund Managers themselves.