Four Southeast Asian countries are working on harmonising rules and regulations with a view to setting up an Asean funds-passporting scheme, according to a senior Thai regulator. The aim is to take the first step towards such a scheme in the first half of next year.
That would make the Association of Southeast Asian Nations an early mover in Asia-Pacific on this front and could prove a catalyst for similar moves in the region, such as Australian proposals for developing an Asia-Pacific framework for funds passporting.
Against the backdrop of a capital-markets overhaul in Thailand, the country’s Securities and Exchange Commission (SEC) is working with counterparts in Indonesia, Malaysia and Singapore to come up with a scheme similar to Europe’s Ucits.
“We felt that when the market [in Thailand] opens up next year, there will be more products coming in, and that will be the foundation for the next step,” says Pravej Ongartsittigul, senior assistant to the secretary-general of the SEC in Bangkok.
The initial target is to have cross-border products selling to non-retail investors within the first half of 2012, and plain products selling to all types of investors within the second half, adds Pravej in an interview to appear in full in AsianInvestor's April issue.
The starting point will be exchange-traded fund (ETF) products. “We want all Asean members to accept a standard, universal version of an ETF that can be listed across all the member exchanges,” Pravej says.
Currently foreign ETFs cannot list directly on the Thai stock exchange; fund managers in the country can only invest in overseas ETFs to provide indirect 'feeder-fund' exposure.
The next step will be the cross-sale of simple and complex products to institutional investors across all Asean member countries. Then the plan is to have simple products cross-sold to retail investors, while sale of complex products would depend on the sophistication of each investor.
“We started out from the Ucits [Europe's Undertaking for Collective Investment Schemes] rules. For lack of a better word, our agreed framework will become the Asean Ucits,” adds Pravej, who oversees broker-dealer supervision, investment adviser supervision and investment management supervision and research.
The 11 member countries of the Asean Capital Markets Forum have endorsed the plan, he says. The initial stage will involve engaging countries that are relatively more ready to explore the cross-recognition and harmonisation of rules and regulations, hence the four countries that are currently in discussions.
“There is no reason why other [Asean] countries won’t join once we can get this started,” says Pravej.
There's no connection between the Australian proposal and the Asean effort at present, he adds. This is despite the fact that Malaysia and Singapore are among the countries that Australia is talking to in its discussions on a potential pilot programme.
“We're only working with Asean members at this point, because it's important to start with markets at a similar level of sophistication,” explains Pravej. “Once we can reach a higher level of product complexity, we can expand and extend the rules.”