Published on April 1, 2008
Seeing upside potential in Chinese and Indian bourses and other undervalued stock markets, local investors may want to punt abroad for better returns.
Authorities recently started allowing Thais to invest up to US$5 million (Bt157 million) each abroad, in order to chase opportunities in foreign countries. Earlier, Thais could only toy with the idea of buying stocks in Hong Kong, Bombay or Shanghai, but monetary regulations prevented them from doing so. They could, however, turn to foreign-investment funds, which arrange such transactions.
But now, fiscal authorities have decided to allow Thais to invest on their own abroad, even though they still need local brokers to carry out the transactions.
Investors can make purchases only in regulated equity markets and sovereign bonds.
The Securities and Exchange Commission (SEC) says individuals are now allowed to invest up to $5 million each, but the amount in any single transaction may not exceed $500,000.
Investors can request a higher investment quota from the authorities once the amount exceeds 80 per cent of $500,000. For example, if a first-time investor invests $250,000, his limit remains $500,000. If he invested another $200,000, he could seek permission from authorities to invest an additional $500,000.
Locals who wish to invest abroad must select reputable brokerage firms and asset-management companies that can properly serve them. These will act as marketing agents in carrying out share purchases through foreign brokerages.
Investors should make sure their brokers are efficient, possess research facilities and have sufficient knowledge in relevant fields. But most important is that they check the commissions and fees charged for services.
Locals can invest in foreign stock markets via personal accounts or a private fund that pools cash from several individuals. They can invest via a brokerage or asset-management company by opening an account to trade abroad. Then the broker or asset-management firm must examine whether the customers are qualified to invest abroad by conducting due diligence regarding the requirements of the SEC. Thus, brokers need to know the customers' financial status before giving them credit lines.
Brokers then submit the customer information to the SEC for approval and then to the Bank of Thailand for separate approval. The final procedure is to ask the SEC for a "foreign-investment allotment", which concerns real-time transactions.
Meanwhile, corporations with assets of at least Bt1 billion can also invest up to $50 million abroad. The limit per transaction is $5 million.
Phillip Securities (Thailand) yesterday said it was ready to provide brokerage services for customers wanting to invest abroad. Its information-technology system is called Poems and is the same one used by its parent firm, the Phillip Capital Group.
It offers investment channels in Singapore, Hong Kong, the US and Malaysia.