Thai ESGX Fund Aims to Stabilize Stock Market Amid Economic Uncertainty
The introduction of the Thai ESG Extra fund is expected to limit losses for the Stock Exchange of Thailand, with analysts projecting a rebound to 1,250-1,300 points.
The Thai Cabinet has approved the establishment of the Thai ESG Extra (ESGX) fund, a move designed to mitigate risks associated with the Stock Exchange of Thailand (SET) index.
Analysts suggest that this initiative could facilitate a recovery of the SET index to between 1,250 and 1,300 points, despite ongoing economic growth concerns.
The ESGX fund will allow investments to be transferred from long-term equity funds (LTFs) and offers new tax-deductible investment options.
Investors can receive tax deductions of up to 300,000 baht for purchases of Thai ESG units.
Furthermore, individuals who shift their entire LTF investments to the ESGX fund are eligible for an income tax deduction of up to 500,000 baht, broken down into 300,000 baht available in the current year, with the remainder available in annual deductions of 50,000 baht from the second to fifth years.
Transfers into the new fund must be completed between May and June of this year.
In addition to the transfer options, a tax deduction for Thai ESG purchases made in this two-month window is also available, capped at 300,000 baht.
The total outstanding investment in LTFs is estimated to be around 180 billion baht.
Kavee Chukitkasem, Chief of Portfolio Advisory at Pi Securities, has endorsed the launch of the Thai ESGX fund, noting its potential to temporarily reduce LTF redemptions and attract new capital to the stock market over the next two months.
However, he pointed out that the tax benefits associated with the ESGX fund are not as appealing as those previously available for LTFs, where investors could deduct up to 1 million baht, combining deductions from LTFs and retirement mutual funds (RMFs).
The Thai ESGX fund is particularly advantageous for high-income individuals earning between 200,000 and 300,000 baht per month, as they can optimize their tax deductions.
For individual investors who are part of the working class, the Super Savings Fund (SSF) remains an alternative, though it requires a 10-year holding period, making it less favored among many.
For unitholders of matured RMF investments, specifically those aged 55 or older, reallocating funds into the Thai ESGX fund is an option.
In concert with the Vayupak 1 Fund, a state-controlled initiative investing in Thai stocks, the Thai ESGX fund is anticipated to provide further stability to the stock market.
Analysts predict support for the SET index at approximately 1,100 points, with resistance levels reaching up to 1,300 points.
Previous resistance at 1,280 points is anticipated to deter a strong rally based on current economic uncertainty.
Kavee indicated that if economic conditions remain weak, the support funds might not aggressively purchase stocks; yet, he emphasized the role of new tax incentives in providing a buffer against significant declines, projecting that the SET index is unlikely to fall below 1,000 points.
He noted that the potential for upward movement in the SET index is contingent upon both domestic and global economic conditions, as foreign investors express concerns regarding uncertainties in Thai policies and the stability of the coalition government.
In related news, the Bank of Thailand (BOT) has been awarded the title of “Central Bank of the Year 2025” by Central Banking Publications, a globally recognized authority on central banks.
This recognition underscores the BOT’s adept management of monetary policy and its role in financial supervision during tumultuous economic conditions.
The BOT was praised for its strategic handling of global economic challenges and domestic structural issues, maintaining economic growth while ensuring long-term price and financial stability.
Its commitment to preserving independence in monetary policy decisions and implementing reforms aimed at modernizing Thailand’s financial services sector aligns closely with its core mission of maintaining economic stability and addressing future financial system challenges.
In late 2023, the BOT raised its policy interest rate to 2.5%, effectively concluding its gradual adjustment strategy following the Covid-19 pandemic.
Subsequently, in 2024, the interest rate was adjusted back to an estimated neutral level of 2.25%, and most recently, the rate was further reduced by 0.25%, settling at 2%.
Analysts suggest that this initiative could facilitate a recovery of the SET index to between 1,250 and 1,300 points, despite ongoing economic growth concerns.
The ESGX fund will allow investments to be transferred from long-term equity funds (LTFs) and offers new tax-deductible investment options.
Investors can receive tax deductions of up to 300,000 baht for purchases of Thai ESG units.
Furthermore, individuals who shift their entire LTF investments to the ESGX fund are eligible for an income tax deduction of up to 500,000 baht, broken down into 300,000 baht available in the current year, with the remainder available in annual deductions of 50,000 baht from the second to fifth years.
Transfers into the new fund must be completed between May and June of this year.
In addition to the transfer options, a tax deduction for Thai ESG purchases made in this two-month window is also available, capped at 300,000 baht.
The total outstanding investment in LTFs is estimated to be around 180 billion baht.
Kavee Chukitkasem, Chief of Portfolio Advisory at Pi Securities, has endorsed the launch of the Thai ESGX fund, noting its potential to temporarily reduce LTF redemptions and attract new capital to the stock market over the next two months.
However, he pointed out that the tax benefits associated with the ESGX fund are not as appealing as those previously available for LTFs, where investors could deduct up to 1 million baht, combining deductions from LTFs and retirement mutual funds (RMFs).
The Thai ESGX fund is particularly advantageous for high-income individuals earning between 200,000 and 300,000 baht per month, as they can optimize their tax deductions.
For individual investors who are part of the working class, the Super Savings Fund (SSF) remains an alternative, though it requires a 10-year holding period, making it less favored among many.
For unitholders of matured RMF investments, specifically those aged 55 or older, reallocating funds into the Thai ESGX fund is an option.
In concert with the Vayupak 1 Fund, a state-controlled initiative investing in Thai stocks, the Thai ESGX fund is anticipated to provide further stability to the stock market.
Analysts predict support for the SET index at approximately 1,100 points, with resistance levels reaching up to 1,300 points.
Previous resistance at 1,280 points is anticipated to deter a strong rally based on current economic uncertainty.
Kavee indicated that if economic conditions remain weak, the support funds might not aggressively purchase stocks; yet, he emphasized the role of new tax incentives in providing a buffer against significant declines, projecting that the SET index is unlikely to fall below 1,000 points.
He noted that the potential for upward movement in the SET index is contingent upon both domestic and global economic conditions, as foreign investors express concerns regarding uncertainties in Thai policies and the stability of the coalition government.
In related news, the Bank of Thailand (BOT) has been awarded the title of “Central Bank of the Year 2025” by Central Banking Publications, a globally recognized authority on central banks.
This recognition underscores the BOT’s adept management of monetary policy and its role in financial supervision during tumultuous economic conditions.
The BOT was praised for its strategic handling of global economic challenges and domestic structural issues, maintaining economic growth while ensuring long-term price and financial stability.
Its commitment to preserving independence in monetary policy decisions and implementing reforms aimed at modernizing Thailand’s financial services sector aligns closely with its core mission of maintaining economic stability and addressing future financial system challenges.
In late 2023, the BOT raised its policy interest rate to 2.5%, effectively concluding its gradual adjustment strategy following the Covid-19 pandemic.
Subsequently, in 2024, the interest rate was adjusted back to an estimated neutral level of 2.25%, and most recently, the rate was further reduced by 0.25%, settling at 2%.
