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In particular, the proposed regulatory changes will likely affect mutual fundsÆ investment into debenture to the greatest extent. According to reports, one of the proposed revisions involves the lifting of a prohibition on managers investing more than 30% of the net asset value (NAV) of the fund issued by an individual company.
Under the new draft resolution issued by the SEC, this restriction will be eased by the SEC and ThailandÆs fund managers will able invest in debentures issued by companies with the same group of owners.
Elsewhere, this new regulatory draft approved by the SEC could also impact the offshore investments of mutual fund managers. Currently, mutual funds in Thailand only dip their toes offshore through foreign investment funds (FIF), which earlier in the year had a quota of $1.8 billion, but this will likely increase in the near-term future.
Although the amendments are still waiting official approval, the noise coming from the SEC suggests that mutual funds will be allowed to invest a greater percentage of NAV offshore and into more offshore investment vehicles, which currently comprise of equity and fixed income instruments.
But the draft revisions will be somewhat limited for offshore investing should they be approved. Thai funds will only be able to invest in countries that are members of the International Organisation of Securities Commissions, which includes all major markets but excludes undeveloped ASEAN markets like Cambodia, Laos and Myanmar.
If approved, the increased offshore investment of Thai mutual funds will also be limited to bourses within the World Federation of Exchanges, which includes every major Asian equity market except the Vietnam Stock Exchange.
On top of these draft approvals, the new regulations for mutual fund companies will also include a new online reporting function, wherein mutual fund firms will have to provide detailed information of investment assets online.
According to the SEC, if the new regulations pass through ThailandÆs Ministry of Finance, it will set the framework for a more liberal mutual fund environment and will hopefully foster greater diversity for an industry that has struggled in the face of more domestic returns. This will no doubt be welcomed by the industry, which according to one Bangkok-based fund manager will provide some increased flexibility that has been lobbied for. A decision on whether the drafts have been approved will come in the next few weeks.
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