Nine stocks are expected to benefit the most from the Finance Ministry's policy to transfer investments from matured long-term equity funds (LTFs) to Thai ESG (environmental, social and governance) funds, with progress on the transfer expected later this month, says Maybank Securities (Thailand).
The ministry is studying a framework to transfer LTF investments to Thai ESG funds, including potential tax benefits and adjustments to the fund investment policy, which is expected to allocate a higher proportion to Thai equities.
The brokerage expects the transition of investments from LTFs to Thai ESG funds should benefit two main categories of stocks. The first group will be reweighted as Thai ESG funds compared with their weighting in LTFs, including Bangkok Dusit Medical Services (BDMS), Siam Cement (SCC), True Corporation (TRUE), Praram 9 Hospital (PR9), and Intouch Holdings (INTUCH).
The other group includes stocks held exclusively in Thai ESG funds, but not in LTFs, which should receive fresh capital when the transition occurs. These include Jaymart Group Holdings (JMART), North East Rubber (NER), Absolute Clean Energy (ACE), and Triple I Logistics (III).
Maybank anticipates the holding period for the new Thai ESG fund will be five years.
The Federation of Thai Capital Market Organizations urged the government to consider reinstating LTFs, with tax benefits similar to those in the past.
"This proposal received positive signals from the Finance Ministry. The transition to Thai ESG funds should be clearer in the first half of 2025, and could be implemented within that period, potentially easing selling pressure from LTF redemptions," the brokerage noted.
"The sooner the policy details are finalised, and the more attractive the tax incentives, the more significant the reduction in LTF selling pressure."
According to Maybank, the Stock Exchange of Thailand (SET) is dealing with external negative factors such as the US-China trade war, geopolitical tensions, and the Federal Reserve's slow pace of interest rate cuts.
Domestic concerns include weak confidence in Thailand's economic growth, declining earnings of large-cap stocks, and company-specific issues affecting certain major firms.
The last of the LTFs reached maturity this year, leading to a mass sell-off, with around 188 billion baht still left for redemption.
"The Thai index decline has been driven by institutional investors redeeming their LTF units as investors are allowed to fully redeem them this year," according to Maybank.
In January alone, LTF net outflows nearly totalled 20 billion baht, exerting pressure on the SET index, which has already dropped 10.2% year-to-date as of Feb 18.
If redemption patterns follow those of the past three years, where January accounts for 29% of total annual LTF redemptions, the total LTF sell-off this year could reach a record high of 60 billion baht, up 77% from the previous year.
"Without additional policy measures, LTF redemptions will remain a risk factor for the Thai stock market this year," noted Maybank, adding that reviving the LTF scheme could help reduce selling pressure for at least five years.