New ESG fund could boost Thai stocks by up to 70 billion baht

Analysts predict that a forthcoming environmental, social and governance (ESG) fund could draw investments of between 20 and 70 billion baht into 114 stocks listed on the Stock Exchange of Thailand’s (SET) ESG index this year. The long-term savings fund, which is set to be established later this year, will be focused on investing in domestic ESG stocks and bonds.

Krungsri Capital Securities (KCS) suggested that if the ESG fund’s investment conditions are similar to the tax benefits offered for the long-term equity fund (LTF), it could be a boon for the Thai stock exchange. The average size of each LTF in the last five years before their expiry in 2019 stood at 65.9 billion baht.

KCS highlighted the difference between the proposed ESG fund and the Super Savings Fund (SSF).

“The ESG fund will be designated to invest in ESG stocks on the Stock Exchange of Thailand [SET]. This differs from the Super Savings Fund [SSF], which is not required to invest only in stocks, and the tax deduction amount for SSF is combined with other kinds of investment such as life insurance and provident funds.”

The SET ESG index currently comprises 34 AAA-rated companies (with total scores of 90 to 100), 70 AA-rated companies (scores of 80 to 89), 64 A-rated companies (scores of 65 to 79), and 25 BBB-rated companies (scores of 50 to 64). The advent of the new fund is expected to enhance the appeal of the SET’s ESG index to investors, especially given the lower stock prices this year, reported Bangkok Post.

Asia Plus Securities (ASPS) noted that the SET ESG index has outperformed the SET index across all time frames, in both bullish and bearish markets. In light of this, all 114 SET ESG stocks are expected to become more popular with both active and passive funds, ASPS said.

“If a new ESG fund with tax perks is issued, the SET index should increase trading value by 20 to 70 billion baht for the rest of this year, probably outperforming global markets.”

Among the ESG stocks likely to be targeted by the fund, according to KCS, are CP All, Gulf Energy Development, Central Retail Corporation, Global Power Synergy, PTT Global Chemical, Indorama Ventures, SCG Packaging, PTT Oil and Retail Business, Carabao Group, and Home Product Center.