The new Thai ESG (environmental, social and governance) fund, which is being established to ease the selling pressure of long-term equity funds (LTFs) that have matured, is expected to be finalised in the first quarter of this year.
Lavaron Sangsnit, permanent secretary to the Ministry of Finance, said that selling of maturing LTF units was among several factors currently affecting the Thai stock market, currently the worst performer in the world with a 10% loss since Jan 1.
He said the ministry is considering a new Thai ESG fund to replace LTFs that have matured.
Mr Lavaron said selling LTF units during a market downturn means the owners will receive a poor return and it will contribute to the bourse's decline.
He said the ministry is evaluating how tax benefits could be structured for existing LTF holders who choose to transfer their investments to new Thai ESG funds instead of selling their units.
LTFs had a five-year holding period requirement, meaning investors can sell their units without losing tax benefits after that period.
LTF units worth 180 billion baht remain unsold, down from 240 billion at the end of last year, with average losses on the investments ranging from 5-10%.
According to Mr Lavaron, in the past LTF purchases averaged between 25 billion and 30 billion baht per year. After the ministry did not extend tax benefits for LTFs, the tax-deductible Thai ESG funds were established, registering an annual purchase volume of roughly 27 billion baht last year.
Thai ESG funds invest in Thai equities and debt securities that meet ESG criteria. Taxpayers can invest up to 30% of their annual income, capped at 300,000 baht, and must hold the investment for at least five years from the date of purchase.
In a related development, Mr Lavaron said the ministry's 2025 goal of 3.5% economic growth is challenging, requiring action on multiple fronts, particularly acceleration of investment projects that were already approved by the Board of Investment (BoI), which remains feasible.
According to BoI data, last year investment promotion applications totalled 3,137 projects, representing a 40.4% year-on-year increase, with a total investment value of 1.14 trillion baht, up 34.5%.
The value of projects that received investment promotion certificates was 850 billion baht, a 72.5% increase.