June 2018

EDITORIAL: All smiles – for now

George_MittonAssisted by private banks, rich Thais have always found ways to move their money offshore. The rest of the nation – those with thousands, not billions to invest – used to buy funds from Thai banks that invested almost solely in Thai assets, largely bonds. Loosened regulations and changed consumer tastes have altered things. As our cover story explains, domestic fund companies have channelled about $35 billion into offshore “feeder” funds – up from $2 billion three years ago – to meet domestic investors’ desire for foreign exposure. For foreign asset managers, Thailand is now as tempting as mango and sticky rice. A booming population of 70 million has money to spare and a taste for offshore investment. But regulations may become less supportive in future. Bond funds, which currently enjoy a tax advantage compared with direct bond investment, may soon become subject to tax. Another problem is finding a distribution partner. The local banks are dominant distributors in Thailand and tend to sell their own funds. It is not easy for a newcomer to displace the market-leading foreign firms, such as JP Morgan Asset Management and Pimco, which provide many of the feeder funds for local banks’ existing offshore offerings. A move to an “open architecture”, in which local banks offer funds from many providers and not just their own branded products, would help foreign firms break into the Thai market. But it is not clear that banks have an incentive to change. Thailand is an incredibly tempting market, but accessing this rich nation of palm trees and pagodas – often referred to as “the Land of Smiles” – will take patience. George Mitton is Editor of Funds Global Asia ©2018 funds global asia

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