Thailand: Progressing through change

I consider Bangkok to be my favorite city in the world. Its vibrancy, food (including the best restaurant in Asia), entertainment and hospitality are consistently at the forefront of expectations. I frequently visit the city and the rate of change is clear through initiatives such as the extension of the BTS line, improved infrastructure and the increased number of new buildings.

The rate of change also extends to the financial markets which are going through a period of progressive change. It has now been two years since the Bank of Thailand allowed more flexibility for investors to go access foreign funds. The fund industry itself is growing both in terms of number of funds and also Assets Under Management (AUM) which has been a trend for the last 10 years. What the changes in regulation have helped to drive is the increase in investment into foreign funds and across different asset classes as investors continue the search for yield. This evolution in the fund management industry will create many opportunities.

Partnerships with international players: This year has already seen the announcement of two significant partnerships between Thai local banks and foreign institutions including the 65% acquisition of TMB Asset Management by Eastspring and the joint venture between Julius Baer and Siam Commercial Bank. I believe this trend will continue as the demand for foreign funds and investments increase from domestic Thai investors. These types of partnerships help to align local strengths and strong domestic distribution networks with international capabilities, know-how and infrastructure.  

Beyond fixed-income: Thai investors have traditionally favoured fixed-income products. They are now starting to diversify their portfolios with a larger allocation towards other asset classes such as equities. Therefore, those who can provide access to a larger network of funds across the different asset classes could benefit. At the same time, there is an educational role that needs to be filled both at the investor level to increase the level of awareness regarding the different asset classes (both accessibility and risks) and also at the institutional level to ensure that financial institutions have the right post trade solutions in terms of back and middle-office operations, accounting, settlement and custody both for both multi asset classes and also non-domestic funds.

Premium service providers: The increase in sophistication from investors, banks and asset managers needs to be matched by service providers who have a key role in bridging the gap between current services geared towards the domestic market and fixed-income related products to open architecture platforms, international funds and multi-asset classes. This is also a great opportunity for service providers to demonstrate their expertise and experience of supporting international expansion through a period of accelerated change.

Access to China: As of September 2017, 55% of Thai Mutual Fund’ investments in foreign bonds and deposits were concentrated in China. As China continues to open itself up through various initiatives from Stock and Bond Connect through to CIBM, this trend sets to continue. Those who have a better understanding of the different ways to connect to China will have an advantage.

In conclusion, the financial markets are undergoing a period of change as investors seek higher returns through more diversified portfolios. This will create opportunities throughout the financial chain and as long as such growth and change is underpinned by strong knowledge, experience and infrastructure.